BryanGarnier-SaaS Insight Report 2020

SOFTWARE
SaaS: the virtuous circle of subscriptions
15 October 2020
SOFTWARE SaaS: the virtuous circle of subscriptions
BG COVERAGE
Rating TP
Top Picks
SAP Buy EUR166
Dassault Systèmes Sell EUR147
Temenos Buy vs. Sell CHF142 vs. 133
Nemetschek Buy EUR71
Sage Group Neutral 730p
Software AG Sell EUR36 vs. 39
Materialise Neutral USD33
Cast Neutral EUR2.9
EasyVista Corporate EUR80
Latest Reports
NEMETSCHEK | 03-Feb-20 | Unappreciated potential for growth in Media & Entertainment
SAP | 12-Jul-19 | This is just the beginning…
Software and IT Services | 27-Jun-19 | Le BIM en plein boom
Software and IT Services | 27-Jun-19 | BIM is booming
RIB SOFTWARE | 27-Jun-19 | A rocky road
RIB SOFTWARE | 27-Jun-19 | Un chemin semé d’embûches
NEMETSCHEK | 27-Jun-19 | Strong foundations sustaining growth
NEMETSCHEK | 27-Jun-19 | De solides fondations soutenant la croissance
Gregory Ramirez
33(0) 1 70 36 57 04
gramirez@bryangarnier.com
1
THEMATICS
SaaS: the virtuous circle
of subscriptions
As of September 2020, Bryan
Garnier & Co’s Equity Research
is becoming more thematic-
focused. This note is specifically
addressing and illustrative of the
following thematic
Managing complexity: creating

and empowering data thanks to
Software
New business models: more

recurrence and less on
premise, the SaaS and cloud
computing paradigm Software-as-a-service is the main reason why software valuation multiples
keep rising. North America is well advanced in this move, and Europe follows
with a growing number of SaaS players going public and on-premise vendors
moving to SaaS or subscriptions, attracted by the resilience of these models.
We expect SaaS IPOs and M&A to accelerate, and SAP is our preferred SaaS
player in Europe.
 In this report, we discuss a number of key issues regarding SaaS and subscription
models in the software industry: 1) why SaaS has become so successful, 2) why
software valuation multiples have surged over the past five years, 3) why private
equity firms are no longer afraid of paying double-digit EV/sales multiples to
acquire SaaS firms, 4) why it is now so attractive for on-premise software vendors to
migrate to SaaS or subscriptions, despite short-term risks to revenues and margins.
 We look at SaaS and subscriptions from a European perspective, with a detailed
mapping of European software players according to their state of progress in SaaS or
subscriptions and their size, valuation multiples, share price performance since the
IPO, and operating KPIs. In addition, we see that despite initial reluctance regarding
public cloud, this move to SaaS and subscription is accelerating, and an increasing
number of SaaS IPOs has taken place in Europe over the past three years – followed
by a cohort of large and small PE-backed private players and opportunities for M&A.
 In this context, SAP is our preferred European SaaS player as its journey to
becoming a EUR15bn cloud company by 2023 is well advanced, it is the no. 2 global
SaaS application vendor, revenue mix change sustains revenue and margin growth,
and the IPO project of Qualtrics may add more value. We also upgrade Temenos to
Buy from Sell as the launch of challenger banks will constitute a strong driver for
cloud adoption. We are positive on Nemetschek as well, as transition to
subscriptions is done carefully.
 In contrast, we are more cautious on Sage, Dassault Systèmes and Software AG,
either due to their early stage progress in SaaS or subscriptions which may require
more business transformation, or investments burdening operating margin.
2
EXECUTIVE SUMMARY
Executive Summary. Résumé
The SaaS model does not have to prove its success Le SaaS n'a plus à prouver son succès. 60% des 90
anymore. 60% of the top 90 software market caps in premières capitalisations boursières des logiciels en
North America have a native SaaS business model. Amérique du Nord ont un modèle d'entreprise SaaS
Such a huge success stems from the demonstration natif. Un tel succès découle de la démonstration de
of the profitability of this model: 9 out of 10 largest la rentabilité de ce modèle: 9 des 10 plus grandes
SaaS firms are profitable. entreprises SaaS sont rentables.
EV/EBITDA multiples of US software vendors have Les multiples EV/EBITDA des éditeurs de logiciels
rocketed to 25-30x during the last 5 years, vs. 15- américains ont grimpé à 25-30x au cours des 5
18x in Europe. The main reasons behind these levels dernières années, contre 15-18x en Europe. Les
in the US were the surge in IPOs of SaaS companies principales raisons expliquant ces niveaux aux US
and the adoption of subscription/SaaS models by sont la vague d’IPO des sociétés SaaS et l'adoption
most vendors. de modèles SaaS pour la plupart des éditeurs.
Nine of the 15 largest SaaS vendors are trading at Neuf des 15 plus grands éditeurs SaaS se négocient à
est. FY21 EV/sales multiple above 30x. The lowest un multiple EV/sales FY21 supérieur à 30x. Les
multiples are for the most mature players which multiples les plus bas concernent les acteurs les
generate 15-25% lfl sales growth and are strongly plus matures avec une croissance du CA de 15-25%
profitable, while the highest ones are those of more et fortement rentables, tandis que les plus élevés
recent players posting 50-100%+ lfl revenue growth sont ceux d'acteurs plus récents affichant une
and not profitable yet. croissance du CA de 50 à 100% + lfl et non encore
We have counted 30 SaaS M&A transactions above rentables.
USD1bn since 2011. Private equity firms entered the Nous avons noté 30 opérations de M&A SaaS
M&A game when SaaS demonstrated profitability supérieures à 1 Md EUR depuis 2011. Les fonds de
and cash generation. M&A valuations remain high in private equity sont entrés en jeu lorsque le SaaS a
the SaaS space, with an EV/sales range between 3- démontré sa rentabilité et sa génération de
5x and 14-16x. trésorerie. Les valorisations EV/sales en M&A
SaaS arrived later in Europe due to reluctance restent élevées dans le SaaS : entre 3-5x et 14-16x.
regarding public cloud. The complexity of European Le SaaS est arrivé plus tard en Europe en raison de
markets and the absence of an ecosystem like la réticence envers le cloud public. La complexité
Silicon Valley offered less opportunities for des marchés et l'absence d'un écosystème à la
European SaaS players. As such, valuation multiples Silicon Valley offraient moins d'opportunités aux
for European SaaS and subscription software vendors acteurs SaaS européens. Par conséquent, les
are still below those of their US peers. Some players multiples de valorisation des éditeurs SaaS ou par
are trading between 12x and 20x EV/sales multiples abonnement européens sont toujours inférieurs à
thanks to their impressive operating margins, and ceux de leurs pairs US. Certains acteurs se
others are trading between 2x and 8x for 2021. négocient à 12-20x en EV/sales grâce à leurs marges
There is scarcity of SaaS IPOs in Europe, yet we opérationnelles impressionnantes, d'autres se
have seen an acceleration trend during the last négocient à 2-8x pour 2021.
three years, with nine admissions to listing. We Les IPO SaaS sont rares en Europe, mais nous avons
have identified UiPath, Talkdesk, Celonis, observé une tendance à l'accélération au cours des
Darktrace, Kyriba, BenevolentAI, Algolia, trois dernières années, avec neuf admissions à la
OutSystems, and Collibra as the main private cote. Nous avons identifié UiPath, Talkdesk,
European SaaS players. Celonis, Darktrace, Kyriba, BenevolentAI, Algolia,
SAP (Buy – Top Picks, TP EUR166) is our preferred OutSystems et Collibra comme les principaux
SaaS player, as its journey to be a EUR15bn cloud acteurs privés européens du SaaS.
company in 2023 is well advanced, it is the No. 2 SAP (Achat – Top Picks, TP 166 EUR) est notre acteur
global SaaS application vendor, revenue mix change SaaS préféré, car son parcours pour devenir une
sustains sales and margin growth, and the IPO société cloud de 15 Md EUR en 2023 est bien
project for Qualtrics may add more value. We avancé, il est le n°2 mondial des applications SaaS,
upgrade Temenos to Buy from Sell (TP CHF142 vs. le changement de mix soutient la croissance du CA
133) as the launch of challenger banks will et des marges, et le projet d’IPO de Qualtrics peut
constitute a strong driver for cloud adoption. ajouter de la valeur. Nous relevons Temenos à
We keep our Buy rating on Nemetschek (TP EUR71), Achat contre Vente (TP 142 CHF vs. 133) car le
our Neutral rating on Sage (TP 730p), and our Sell lancement de « néo-banques » devrait constituer à
ratings on Dassault Systèmes (TP EUR147), and un facteur important d’adoption du cloud.
Software AG (TP EUR36 vs. 39). Nous conservons nos recommandation Achat sur
Nemetschek (TP 71 EUR), Neutre sur Sage (TP
730p), et Vente sur Dassault Systèmes (TP 147 EUR),
et Software AG (TP 36 EUR vs. 39).
3
Contents
BG COVERAGE 1
Latest Reports 1
EXECUTIVE SUMMARY 3
1. The SaaS model remains very attractive 6

In the US, SaaS and subscriptions are now the norm 6
SaaS and subscriptions have led to sky-high valuation multiples 8
The size of M&A transactions in SaaS has increased over time 12
Subscription/SaaS metrics: revenues do not mean enough 13
From “straight selling” to customer success management 16
A transition case to subscriptions: Autodesk 17
2. In Europe, SaaS is more about a soft transition 22

A hybrid model rather than a pure SaaS or subscription model 22
Valuation multiples below those of North American SaaS players 23
The majority of listed software firms has moved to subscriptions 25
Still lack of communication from European players on KPIs 27
What about the M&A and IPO environment in SaaS in Europe? 30
3. The transition in practice in our coverage 34

Our investment cases on six transitioning software companies 34
SAP: transition basically achieved, now a “cloud company” 36
Dassault Systèmes: Medidata opens the door to SaaS 39
Temenos: SaaS makes inroads thanks to challenger banks 43
Nemetschek: transition only beginning 45
Sage Group: transition to subscriptions almost achieved 47
Software AG: transition to subscriptions only in progress 50
4
The SaaS model remains very attractive
5
The SaaS model remains

very attractive
In the US, SaaS and subscriptions are now the norm
More than Half of Top 20 North American Software firms have a SaaS model
The SaaS model, which is essentially based on subscriptions, does not have to prove
its success anymore. Led by Salesforce, software-as-a-service has become the norm in
the software industry. Over the last 15 years it has displaced the traditional software
licensing model (perpetual, term-licences or rental) which had made the success of
Microsoft, Oracle, IBM and SAP.
 60% of the top 90 software market caps (and 11 among the top 20) in North
America are software vendors with a native SaaS business model, with
Salesforce, Zoom Video, Shopify, ServiceNow and Snowflake as the main
players. In addition, Salesforce has become the third-largest software vendor
globally, behind Microsoft and Adobe and just ahead of Oracle.
 On top of the native SaaS vendors, some traditional software vendors which
used to sell perpetual licences have successfully completed the migration of
their business towards a SaaS or a subscription model (Adobe and Autodesk)
and many others are in advanced transition or migration to SaaS or
subscriptions such as Microsoft, Oracle, Intuit, VMware (21% of revenues),
Atlassian (58%), Splunk (26%), Citrix (31%), Check Point Software (31%), Open
Text (36%), PTC (48%), or Guidewire (17%, or 56% including term licences).
 A few exceptions like Ansys or NetApp have not moved yet towards SaaS or
subscriptions, primarily for customer-specific reasons.
Fig. 1: Top 15 SaaS and subscription-based software vendors ranked by
market cap (USDm)
240 000
220 000
200 000
180 000
160 000
140 000
120 000 246 724 242 815
100 000
80 000 152 915

134 602
60 000
99 410
40 000
69 066
55 197 53 524 50 294 46 537
20 000 44 108 35 639 33 615 31 631
21 599
0
Adobe Salesforce Zoom Video Shopify ServiceNow Snowflake Workday Autodesk Twilio Veeva DocuSign Datadog CrowdStrike Okta Coupa
Source: Refinitiv, as of 13/10/2020.
6
SaaS companies have demonstrated their ability to be profitable

One of the reasons why SaaS and subscription models have proven success is the
demonstration of their profitability. Unlike ten years ago, 9 out of 10 largest SaaS and
subscription-based companies are now profitable, and some of them are highly
profitable on a non-GAAP operating margin standpoint, with Adobe at 38%, Veeva at 37%,
Autodesk at 25% and ServiceNow at 21%. Including hosting costs, the cost of sales usually
accounts for 20-25% of revenues (except for Adobe, Zoom Video and Autodesk, which do
not provide much service around software) – the situation for Shopify is different as this
company provides payment services as well. Salesforce, ServiceNow and Autodesk spend
35-40% of their revenues on sales and marketing (and Zoom Video almost 50%), but Veeva
spends way less (14%). Finally, R&D spending is significant at Workday (30% of sales),
while it is usually around 15-20% in the industry. Snowflake is not profitable yet,
essentially as is spends more than 100% of its revenues on sales and marketing. The key
to becoming profitable is to increase sales efficiency, which can be done when market
penetration is high and subscription revenues are high enough to better cover R&D and
G&A costs. Such a sales efficiency increase can be realised by selling more to existing
clients (additional products) rather than by hunting for new customer acquisition. That
said, Snowflake is an outlier, since this vendor is still on a heavy investment mode and
can expect more “normalised” ratios a couple of years from now. Many listed US SaaS
players were in the same situation as Snowflake, and have been reducing their non-GAAP
operating losses year after year: CrowdStrike, Okta, MongoDB, Elastic, Anaplan, Medallia,
Cloudera, Smartsheet…
Fig. 2: P&L structure of the 10 largest SaaS and subscriptions vendors in

2020 (% of sales)
210%
200%
190%
43%
180%
170%
160%
150%
34%
140%
130%
120%
110%
100%
14% 8%
90% 21% 17% 20% 24% 21%
25%
80% 9% 44% 103% 22%
17%
70% 13% 16% 14%
16%
60% 22% 30%
50% 48% 35% 14%
39% 16% 36%
40% 8% 8% 49%
30% 10% 26%
28% 7%
20% 38% 9% 12% 37%
26% 7%
10% 18% 21% 25% 11%
14% 9% 13%
0% 3% 5%
-10%
-20%
-30%
-40%
-50% -106%
-60%
-70%
-80%
-90%
-100%
-110%
Adobe Zoom Video ServiceNow Autodesk Veeva Systems
Non-GAAP EBIT G&A S&M R&D COGS
Source: Company Data.
7
By contrast, large on-premise and hybrid independent software vendors such as Intuit,
VMware, Dassault Systèmes or Atlassian usually spend c. 15% of revenues in COGS – cost
of licences, subscriptions, maintenance, services and hosting - due to low investment in
cloud infrastructure – unlike Microsoft, SAP and Oracle which have made their
transformation towards a SaaS model, 10-20% in R&D due to the maturity of mainstream
products (except Atlassian), 15-30% in sales and marketing (except Splunk), and for the
bigger ones less than 5% in G&A. This leads to a non-GAAP/non-IFRS operating margin
between 30% and 45% which is, in our view, the “Holy Grail” SaaS vendors intend to reach
over the long term 1 – without confirming such a scenario is realistic.
Fig. 3: P&L structure of the 10 largest on-premise and hybrid vendors in

2020 (% of sales)
100%
16% 16% 16% 14% 15% 9% 13%
90% 20%
32% 28% 12%
80% 14%
13% 16% 19% 17% 18%
70% 35%
14% 31%
60% 13% 20% 27% 29% 34%
50% 14% 31% 4%
25% 3% 15% 44%
40% 4% 7%
4% 7% 8%
30% 10% 14%
20% 37% 44% 9% 45%
29% 34% 31% 30%
10% 23% 23%
14%
0%
Microsoft SAP Oracle Intuit VMware Dassault Atlassian Splunk Ansys Citrix
Systèmes Systems
Non-GAAP EBIT G&A S&M R&D COGS
SaaS and subscriptions have led to sky-high valuation

multiples
The big valuation gap between the US and Europe explained by SaaS
Fig. 4: 12-month forward EV/EBITDA multiple: US software vs. Europe
software (2006-2020)
35
30
25
20
15
10
5
0
May/07
May/08
May/09
May/10
May/11
May/12
May/13
May/14
May/15
May/16
May/17
May/18
May/19
May/20
Nov/06
Nov/07
Nov/08
Nov/09
Nov/10
Nov/11
Nov/12
Nov/13
Nov/14
Nov/15
Nov/16
Nov/17
Nov/18
Nov/19
EV/EBITDA EU EV/EBITDA US
Source: Refinitiv; Bryan, Garnier & Co ests., as of 13/10/2020.
1 Salesforce’s founder and CEO Marc Benioff has for more than a decade stated that his
company has the means to reach non-GAAP operating margin in the mid-30s over the
long-term.
8
As illustrated in Fig. 4 above, while between 2010 and 2015 on average the shares of
US software vendors were trading at EV/EBITDA multiples of 10-15x, such multiples
have rocketed to 25-30x during the last 5 years. On the other hand, EV/EBITDA
multiples have stayed around 15-18x in Europe. The main reasons behind such high
valuation levels in the US were: 1) the surge in IPOs of SaaS companies in the US during
the past 10-15 years; 2) the adoption of subscription and SaaS models by most of the
software vendors over the last 5-10 years; 3) the ramp-up of recurring revenues
(maintenance, subscriptions, SaaS) along with lower churn rates over time as the installed
base matures, at the expense of licence sales, with better coverage of fixed costs; 4) the
ramp-down of services as a percentage of revenues.
Fig. 5 shows how the sky-high valuation of SaaS and subscription-based software vendors
has positively impacted the mix in the valuation of software vendors in North America.
Nine of the 15 largest SaaS or subscription-based vendors are trading at an est. FY21
EV/sales multiple above 30x, and only Salesforce and Workday are trading between 10x
and 15x. Adobe, ServiceNow and Autodesk are trading between 15x and 20x, Twilio
between 20x and 30x, Shopify, Veeva, DocuSign, CrowdStrike and Okta between 30x and
40x, and Zoom Video, Snowflake, Datadog and Coupa at stellar multiples above 40x.
Fig. 5: Top 15 SaaS and subscription-based software vendors: FY21e

EV/sales multiple (x)
120
110
100
90
80
70
60
114.6
50
40
30 63.5
20 44.8 43.2
37.8 39.6 38.4
31.7 31.4
10 23.9
16.4 17.4 14.1
11.2 12.6
0
Adobe Salesforce Zoom Video Shopify ServiceNow Snowflake Workday Autodesk Twilio Veeva DocuSign Datadog CrowdStrike Okta Coupa
On the other hand, on-premise and hybrid vendors are valued at lower valuation
multiples. For instance, SAP, Oracle, VMware, Citrix, Check Point Software, SS&C,
Constellation Software, PTC and NetApp are trading at low- to mid-single-digit EV/sales
multiples, as they are generating lower revenue growth due to the maturity of their
business, and although their operating margins tend to be way higher than SaaS players.
While Microsoft, Intuit and Dassault Systèmes are trading around 10x sales, in line with
Salesforce, there are a few exceptions which are trading at double-digit multiples, like
Atlassian (revenue growth above 30%), Splunk (revenue growth above 30% until 2019,
then a slight decline in H1 2020 due to the transition to the SaaS model) and Ansys
(outstanding margins).
9
Fig. 6: Top 15 on-premise and hybrid vendors: FY21e EV/sales multiple (x)
25
20
15
24.0
10
16.4
15.0
5 10.2 10.5
9.2 8.3
7.3
5.9 5.3 5.7 5.5 5.5 6.1
4.6
1.8
0
Microsoft SAP Oracle Intuit VMwareDassault Syst.Atlassian Splunk Ansys ConstellationCheck Point Citrix SS&C Norton LifeLock
Pegasyst. NetApp
Source: Refinitiv; Bryan, Garnier & Co ests., as of 13/10/2020
It is all about growth: SaaS versus on-premise/hybrid

As shown in Fig. 7 below, the lowest EV/sales multiples in SaaS and subscription-based
software are for the most mature players which generate 15-25% lfl sales growth and
have proven their ability to be strongly profitable – Salesforce and Workday generate c.
20% lfl revenue growth and have non-GAAP operating margins of 18% and 13% respectively
-, while the highest ones are essentially those of more recent players posting 50%+
lfl revenue growth and not profitable yet – but reducing losses in order to be in the
black as soon as possible. This is particularly the case for Snowflake (133% revenue growth
over H1 2020). In addition, above 10% revenue growth, it has been statistically observed
that investors reward pure SaaS models compared to on-premise or hybrid ones.
Fig. 7: North American software vendors: FY21 EV/sales vs. FY19-FY22

sales CAGR
50%
40%
FY19-FY22 sales CAGR (%)
30%
y = 0.01x + 0.07
R² = 0.62
20%
10%
0%
-10%
0 5 10 15 20 25 30 35 40 45 50
FY21e EV/sales (x)
Source: Refinitiv; Bryan; Garnier & Co ests., as of 13/10/2020.
* SaaS vendors are represented by coloured dots, while on-premise and hybrid software vendors are represented
by white dots.
** Snowflake is not represented in this scatter chart as there is no consensus available since the IPO is recent.
10
This supposed “correlation” between EV/sales multiples and revenue growth + profit
(EBITDA or EBIT) margin is named the “Rule of 40%” 2: if this sum of revenue growth and
profit margin totals at least 40%, then a software company which is at scale is in good
health and could double in valuation. That said, as this is not the purpose of our report,
we will neither support, challenge nor backtest this empiric rule: let’s just take it as a
given, which exists in the mind of some growth investors.
Fig. 8: North American SaaS vendors: 2019 and H1 2020 lfl revenue growth
300% 270%
250%
200% 174%
150% 133%
88% 93% 85%

100% 74% 83% 77%
47% 55% 48%
35% 33% 39% 42%
50% 24% 16% 23% 17% 26% 21% 23% 19% 26% 23%
0%
Adobe Salesforce Zoom Video Shopify ServiceNow Snowflake Workday Autodesk Veeva DocuSign Twilio CrowdStrike Datadog
2019 H1 2020
Source: Company Data; Bryan, Garnier & Co ests.
Fig. 9: North American on-premise / hybrid vendors: 2019 and H1 2020 lfl
revenue growth
40% 37%
35% 31% 31%
30%
25% 21%
20% 16%
13% 14% 13% 13% 12% 13%
15% 10%
10% 7% 7% 7%
5% 4% 3% 4%
3% 3% 1%
5% 1%
0%
-5% -1% -2%
-10% -5%
Microsoft SAP Oracle Intuit VMWare Dassault Atlassian Splunk Ansys Citrix Check SS&C PTC
Systèmes Point
2019 H1 2020
Very strong appetite for SaaS Ipos in the US

Fig. 10 below details the Top 20 native SaaS IPOs by amount raised and their performance
as of 13th October 2020. The largest amounts of money raised at IPO to date have been
done in SaaS by Snowflake in 2020, Dropbox in 2018, Zoom Video in 2019, Datadog
in 2019, and Workday in 2012. Salesforce is not part of the Top 20 as in 2004 it raised
“only” USD110m for its IPO, when it was valued at USD1.1bn. Most of these IPOs in the
US have been extremely successful, with IPO-to-date market caps multiplied by 38 for
ServiceNow in eight years, by 24 for Coupa in four years, by 18 for Okta in three years,
by 19x for Twilio in four years, 19 for Veeva in seven years, 17 for Zoom Video in one
year, and by 15 for MongoDB in three years. For Salesforce, the performance multiplier
was even bigger, at an outstanding 160, but over 16 years. Valuation multiples have
2FeldThoughts, The Rule of 40% For a Healthy SaaS Company, 3rd February 2015. As
mentioned by Brad Feld in this article, the 40% rule is that growth rate + profit should
add up to 40%. So, if a company is growing at 20%, it should be generating a profit of
20%. If it is growing at 40%, it should be generating a 0% profit. If it is growing at 50%, it
can lose 10%. https://feld.com/archives/2015/02/rule-40-healthy-saas-company.html.
11
rocketed as well, as EV/sales for the year N since the IPO has surged to 114.6x from 44x
in a couple of days for Snowflake, 63.5x from 13.4x in one year for Zoom Video, 43.2x
from 5.0x in four years for Coupa, to 38.4x from 4.9x in three years for Okta, to 32.1x
from 5.7x in three years for MongoDB, to 23.9x from 6.1x in four years for Twilio, and to
19.2x from 4.5x in two years for Anaplan. This remarkable stockmarket career stems
from very strong revenue growth posted by these firms, essentially at constant scope,
while five of those mentioned above are still loss-making.
Fig. 10: Top 20 native SaaS IPO by amount raised in USD and performance
as of 13/10/2020
Company IPO date USDm IPO valuation EV/sales (N) Market cap EV/sales (N) Mkt cap
raised (USDm) (x) (USDm) (x) change
since IPO
Snowflake 15-09-20 3400 33,300 44.0 69,066 114.6 107%
Dropbox 23-03-18 756 9,200 5.8 8,409 3.9 -9%
Zoom Video 18-04-19 751 9,200 13.4 152,915 63.5 1562%
Datadog 19-09-19 645 7,800 19.5 35,639 60.9 357%
Workday 12-10-12 637 4,490 13.6 55,197 12.6 1129%
CrowdStrike 12-06-19 612 6,600 11.8 33,615 39.6 409%

Holdings
Dynatrace 31-07-19 570 4,400 8.6 12,476 19.3 184%
Pivotal Software 20-04-18 555 3,800 4.7 delisted - -
Cloudflare 12-09-19 525 4,400 13.1 11,512 26.7 162%
JFrog 15-09-20 352 4,000 24.3 6,528 41.5 63%
Medallia 18-07-19 326 2,500 5.4 4,601 9.3 84%
Pluralsight 17-05-18 310 2,000 7.8 2,731 6.1 37%
Anaplan 12-10-18 264 1,400 4.5 8,729 19.2 523%
Veeva Systems 16-10-13 261 2,400 10.1 46,537 31.7 1839%
MongoDB 19-10-17 256 1,170 5.7 17,782 32.1 1420%
Elastic 04-10-18 252 2,500 8.1 10,841 19.2 334%
Tenable Holdings 26-07-18 250 2,100 7.2 4,213 9.4 101%
Cloudera 28-04-17 225 1,900 4.2 3,674 3.8 93%
MuleSoft 18-03-17 221 2,900 9.1 delisted - -
PagerDuty 10-04-19 218 1,800 10.1 2,450 10.9 36%
Source: Company Data; Crunchbase; Refinitiv; Bryan, Garnier & Co ests.
The size of M&A transactions in SaaS has increased

over time
We have noticed 30 SaaS M&A transactions above USD1bn since 2011. Initiated by
Oracle, SAP and IBM, such a move has been followed by Salesforce, smaller players, and,
since 2016, private equity funds which were initially reluctant to invest in SaaS vendors
due to the short-term lack of cash generation. Private equity firms entered the M&A
game when SaaS demonstrated profitability and cash generation. The largest SaaS
acquisition made by a private equity firm was Ultimate Software for USD11bn by Hellman
& Friedman in 2019 – before being sold in 2020 to Kronos for USD12bn. It was followed by
12
Athenahealth in 2019 by Veritas Capital and Evergreen Coast Capital for USD5.7bn, Veeam
in 2020 by Insight Partners for USD5bn, and LogMeIn in 2020 by Francisco Partners and
Evergreen Coast Capital for USD4.3bn.
Fig. 11: Top 15 SaaS M&A transactions ranked by size (in USDbn)
12
10
6 12.0
11.0 11.0
9.3
4 8.3 8.0
6.5
5.8 5.7 5.2 5.0 4.8
2 4.3 4.3 4.0
Systèmes)…
(Oracle) (2016)
Concur (SAP)
Qualtrics (SAP)
(Kronos) (2020)
Athenahealth
Ariba (SAP)
Ellie Mae (ICE)
(Salesforce)
(Adobe) (2018)
Hortonworks
funds) (2019)
funds) (2020)
funds) (2020)
Dealertrack
Software (PE
LogMeIn (PE
(Cox Auto)
(Dassault
Solutions
Medidata
Veeam (PE
(Cloudera)
(PE funds)
MuleSoft
(2015)
Ultimate
(2012)
(2018)
(2019)
NetSuite
(2019)
Software
Marketo
(2014)
Ultimate
(2020)
(2019)
Fig. 12 below shows that M&A valuations remain high in the SaaS space, with an
EV/sales range between 3-5x (LogMeIn by Francisco Partners and Evergreen Coast Capital,
Athenahealth by Veritas Capital and Evergreen Coast Capital, DealerTrack by Cox
Automotive, Veeam by Insight Partners) and 14-16x (MuleSoft by Salesforce, Marketo by
Adobe, Qualtrics by SAP). However, they look reasonable compared to listed SaaS
companies when we look at Snowflake, Zoom Video, Shopify, Coupa, CrowdStrike,
Datadog, Okta, DocuSign or Veeva.
Fig. 12: Top 15 SaaS M&A transactions – EV/sales multiples (x)
18
16
14
12
10
8 15.7 15.4
14.0
6 12.2 12.6 12.0
9.0 10.0 9.4
4 7.8 7.2
2 4.2 5.0 4.7
3.4
0
(Oracle) (2016)
Concur (SAP)
Qualtrics (SAP)
(Kronos) (2020)
Athenahealth
Ariba (SAP)
Ellie Mae (ICE)
(Salesforce)
(Adobe) (2018)
Systèmes)
Hortonworks
funds) (2019)
funds) (2020)
funds) (2020)
Dealertrack
Software (PE
LogMeIn (PE
(Cox Auto)
(Dassault
Medidata
Veeam (PE
(Cloudera)
(PE funds)
MuleSoft
(2019)
(2015)
Ultimate
(2012)
(2018)
(2019)
NetSuite
(2019)
Software
Marketo
(2014)
Ultimate
(2020)
(2019)
Subscription/SaaS metrics: revenues do not mean

enough
With the emergence of the SaaS model, software vendors disclose a set of specific
metrics which measures the performance of their business. The rationale of these KPIs
is the disconnection between sales bookings and revenue recognition, and, a fortiori,
operating margin and operating and free cash flow, due to the pro rata temporis nature
of revenue recognition for a SaaS contract or a software subscription. In addition, due to
13
the multi-year nature of SaaS contracts, recognised SaaS revenues are a late
performance indicator, hence the necessity to find forward-looking performance
indicators. These metrics are ARR/MRR, bookings, ACV/TCV, renewal rate by value,
RPO/CRPO, and calculated billings. Fig. 13 below shows how these metrics are used by
listed North American SaaS or subscription-based software vendors.
Fig. 13: KPIs for North American software vendors with a SaaS or a
subscription model
ARR/MRR ACV/TCV Renewal RPO CRPO Calculated No.
rate by billings customers
value
Adobe Yes - - Yes - - -
Salesforce.com - - - Yes Yes - -
Shopify Yes - - - - - -
Zoom Video Communications - - Yes - - - Yes
ServiceNow - Yes Yes Yes Yes Yes -
Snowflake - - Yes Yes - - Yes
Workday - - - - - - -
Autodesk - - Yes Yes Yes Yes -
Veeva Systems - - - - - Yes -
DocuSign - - - - - Yes Yes
Twilio - - Yes - - - Yes
CrowdStrike Holdings Yes - - - - - -
Datadog Yes - - - - - -
Okta - - - Yes - Yes -
Coupa Software - - - - - - -
 ARR (annual recurring revenues) or MRR (monthly recurring revenues). ARR

is the value of all components of recurring revenue for the last day of a
period, annualised for the ensuing year. MRR is the monthly version of ARR,
and is primarily used for small companies with stellar growth. As such, we can
bet on a transformation of the communication to ARR from MRR for these
companies from the moment that growth slows down and “normalises”
gradually as their size increases. Adobe, CrowdStrike and Datadog use ARR and
Shopify uses MRR.
 Bookings are the value of contracts signed for a given period of time. New
bookings include new or existing customers who have just signed up for a
product or service. Expansion or upgrade bookings from upselling usually fall
under new bookings as it is a new contract for the customer. Finally, renewal
bookings include existing customers whose contracts are up for renewal, and
can be calculated either at the time of the effective renewal date or when
renewal request is received on another date as opposed to the end of the
contract. Bookings is not used by the largest US SaaS vendors, but it is
sometimes used by players listed in Europe.
14
 ACV (annual contract value) or TCV (total contract value) of new multi-year
contracts, upsells and renewals. ACV is the annual value of incremental
business taken in-year, including new customers, up-sell/cross-sell, and only
includes the recurring element of the contract and excludes variable
elements. TCV is the total value of incremental business taken in-year. It
includes any recurring revenue from the contract, as well as all one-time
charges (onboarding fees, directly related pre-sales consulting fees, if
appropriate, etc.). It is calculated as follows: TCV = (MRR * contract term
length) + contract fees. TCV can differ from new bookings in that new
bookings may be defined to include only certain items and only the first year
of a multi-year agreement, whereas TCV is not typically limited to the first
year, nor would it typically except certain transaction types. ACV is the value
of bookings that will be generated over the ensuing year under a given
contract or contracts. ACV is used by ServiceNow for instance.
 Renewal rate by value or net revenue retention (NRR). This is a measure of

customer retention, expressed as a percentage of the revenues, ARR, MRR or
bookings, during usually one year. It consists in taking the revenue, ARR, MRR
or bookings at the end of the previous period, minus the value of contracts
cancelled, reduced or not renewed (churn), plus the value of upsells (add-ons,
additional users, features, modules or functionalities) during the period,
plus/minus price increases/decreases on existing contracts. It is often used in
the US, e.g. Zoom Video, ServiceNow, Snowflake, Autodesk and Twilio.
 For companies listed in the US, RPO (remaining performance obligations)

and CRPO (current RPO). Transaction price allocated to the RPO represents
contracted revenue which has not yet been recognised, which includes
unearned revenue and unbilled amounts that will be recognised as revenue in
future periods. RPO represents all future revenue under contract that has not
yet been recognised as revenue. CRPO represents future revenue under
contract that is expected to be recognised as revenue in the next 12 months.
Transaction price allocated to the remaining performance obligations
represents contracted revenue that has not yet been recognised, which
includes unearned revenue and unbilled amounts that will be recognised as
revenue in future periods. Unbilled portions of the remaining transaction price
denominated in foreign currencies are revalued each period based on the
period and exchange rates. Adobe, Salesforce, ServiceNow, Snowflake,
Autodesk and Okta use this metric.
 Calculated billings are revenues plus total deferred revenues at the end of
the period minus deferred revenues at the beginning of the period. This KPI is
widely used, for instance by ServiceNow, Autodesk, Veeva, DocuSign and Okta.
 Number of customers. This KPI is not specific to SaaS or subscription-based

software vendors, but is a meaningful metric in that case, especially for
emerging players which have to build an installed base and hence measure
their commercial success, net of customer churn. It is used by Zoom Video,
Snowflake, DocuSign and Twilio, for instance.
15
From “straight selling” to customer success

management
Selling SaaS or software subscriptions has proven to be quite different from selling
perpetual licences.
 The sale cycle for perpetual enterprise software licences is straightforward

– the vendor sells the licences through its presales and sales teams, then
integrates them by its professional service teams or through a systems
integrator, then provides support and maintenance on them via a dedicated
team, then ensures the renewal, adds users, add-ons and upgrades, or
replaces them by a new version, through the account manager sometimes
helped by an “inside sales” team specialised in sales to existing customers
(less time and effort). The sale of a new project with a new customer requires
a lot of time and effort and usually starts with a “pilot” which, when it
satisfies the stakeholders, is extended to a general deployment. Even though
the “solution selling” approach which is now mainstream among large
software vendors has generated a more “recurrent” selling process, the
perpetual software licence sales cycle can: 1) lead to disconnects in handoffs,
as it is not unusual the account manager changes over the years; 2) be
perceived as a “hit and run” process by the customer, with the risk of limited
customer care once the sale is done or the software implemented; 3) lead to
customer expectation gaps if the project stalls.
 The sales cycle for a software subscription, whether or not in SaaS, is a

continuous client engagement requiring ongoing and proactive account
management. A new SaaS or subscription customer usually starts with a “try
and buy” offer which may be obtained from a web search leading to the
software vendor’s website or e-store, or access to a knowledge network, a
virtual chat with a sales assistant, demos, webinars and trials. If the try is
conclusive, then commercial talks enter into a more technical mode with the
intervention of technical sales reps, and the offer is converted into a paid
subscription spread over three years on average. This cycle is named “land,
expand, adopt and renew”. Once the customer is engaged, it is addressed by
the SaaS vendor’s “customer success organisation”, which is an integrated
team gathering the presales, sales, professional services and customer
support, which constantly measures customer experience, develops
engagement with customers, and coordinates and executes actions related to
customer interactions. The goal here is to maximise the different KPIs
mentioned above such as ARR, bookings, ACV/TCV, backlog, and renewal
rate by value.
16
Fig. 14: The new selling model in the software industry: customer success
management
Source: Software AG.
In parallel to this move, the sales commissions system is modified in order to generate
incentives to acquire new customers with subscriptions and convert existing
customers to subscriptions. As such, the software vendor proceeds to a realignment of
the system according to which sales commissions are based on the present value of the
subscription over a given period – usually over three years – in order to discourage
perpetual licence selling. In order to favour new customer acquisition, subscription
renewals are usually not addressed by the main sales team, but by a dedicated “inside
sales” team which is focused on small accounts, ‘line of business’ customers, add-ons
and contract renewals, and which has a specific (and lower) variable compensation
scheme.
A transition case to subscriptions: Autodesk

There are many stories about business model transformation from perpetual licensing
to subscriptions or SaaS: Microsoft, Oracle, Adobe, Autodesk, Citrix, PTC... Some of
them have been clearly “voluntarist” and led during the transition period to a fall in
revenues and a surge in non-GAAP operating expenses as a percentage of revenues – and
a fall in operating profit, if not a move to losses. The typical cases for such a fast
transition are Adobe (2012-2015) and Autodesk (2015-2018), since their respective
models were essentially derived from the sale of perpetual licences in volumes, with
little recurring revenues except software maintenance. This move has been
conceptualised by the TSIA (Technology Services Industry Alliance) as the “fish model” 3
– a line chart which compares revenues and non-GAAP operating expenses as a percentage
of revenues has the shape of a fish during the transition period. According to TSIA, over
a period of 1 to 3 years, the reduced revenue and high initial expense phases subside and
the financial model starts to look solid, but that transition period is real and almost
impossible to avoid.
3 TSIA (Technology Services Industry Alliance), Technology-as-a-Service Playbook
(2016).
17
Fig. 15: The “fish model” applied to Autodesk (FY14-FY21) (FYE 31st
January)
1000 130%
120%
900
110%
800
100%
700 90%
80%
600
70%
500
60%
400 50%
Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021
Revenues (USDm) (left scale)
Non-GAAP operating expenses (% of revenues) (right scale)
In the case of Autodesk, the transition from perpetual licensing to a subscription

model started in 2015 and ended in 2018, first through selling subscriptions in parallel
with perpetual licences, then by ending the sale perpetual licence sales for individual
products end 2015, then for product suites mid-2016. During this four-year transition
period, the share of subscriptions as a percentage of revenues surged to 75% from 0%,
and reached 92% for the quarter ended on 31st July 2020. Revenues started to decline
on a year-on-year basis mid-2015. This decline accelerated until late 2016 (-26% in
Q4 FY17), then Autodesk went back to growth from mid-2017 and the recovery
accelerated late 2017 and in 2018 and 2019 up to the high 20s. In parallel, non-GAAP
opex surged from 76% of revenues early 2013 to 117% late 2016, then gradually
declined to 71% late 2019. Non-GAAP operating margin, which was at 25.4% in 2012 (FYE
31st January 2013) fell to 15.2% in 2014, then 11.2% in 2015 and -6.2% in 2016, then
stabilised at -5.2% in 2017 before rebounding to 12.3% in 2018, then 24.5% in 2019 (FYE
31st January 2020), and, as of August 2020, management was guiding for 27.5-29% for
2020 (FYE 31st January 2021).
Fig. 16: Autodesk – Quarterly revenue mix by nature (FY17-FY21) (USDm)
900
800
700
600
500
400
300
200
100
-
Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Q3 2019 Q1 2020 Q3 2020 Q1 2021
Subscription revenue Maintenance revenue Other revenue (licences, services)
18
As shown on Fig. 17 below, we see the inflexion point for total revenues – i.e. when
total revenues stopped to decline - was when Autodesk reached around 40% of its
revenues on subscriptions in the course of 2017 (FY18). Growth accelerated in 2018
(FY19) when the 70% threshold was reached. The Covid-19 crisis slowed Autodesk’s
revenue growth in 2020 (FY21) – it had some impact to subscriptions as well -, but we
deem normative growth is likely to stay more or less in line with the trend the company
had in 2018-2019.
Fig. 17: Autodesk – impact from the transition to subscriptions to revenues

(FY17-FY21)
180 100%
170 90%
160 80%
150 70%
140 60%
130 50%
120 40%
110 30%
100 20%
90 10%
80 0%
Q1 2017 Q1 2018 Q1 2019 Q1 2020 Q1 2021
Total revenues - base 100 (left scale)
Subscriptions as a % of total revenues (right scale)
Finally, on Fig. 18 below, we see Autodesk’s share price reacted positively to the
business model change despite the short-term negative implications on revenue growth
and non-GAAP operating margin. It even rose 74% between January 2016 and the
revenue and non-GAAP operating margin trough in January 2017. As revenues returned
to growth and profitability has improved, the share price continued to rise. We consider
such a successful transition to subscriptions shows software vendors following a similar
path can see their share price react positively despite short-term headwinds to
revenues and margins, provided that this transformation is delivered in line with – or
above – expectations.
19
Fig. 18: Autodesk – share price reaction vs. revenues and operating margin
(2016-2019)
Price vs. Revenues

200 950
180 900
160 850
140 800
120 +74% 750
100 700
80 650
60 600
40 -26% 550
20 500
0 450
Price vs Operating Margin (Non-GAAP)

200 30%
180 25%
160 20%
140 15%
120 10%
+74%
100 5%
80 0%
60 -5%
40 -10%
-266%
20 -15%
0 -20%
Source: Refinitiv; Bryan, Garnier & Co.
20
In Europe, SaaS is more about a soft

transition
21
In Europe, SaaS is more

about a soft transition
A hybrid model rather than a pure SaaS or
subscription model
In Europe, the only large SaaS pure player is TeamViewer in Germany, which is not a
native SaaS vendor as it initially sold perpetual licences before converting its model
to subscriptions. This is the same for Fortnox and Vitec in Sweden, Esker in France and
Basware in Finland. Blue Prism in the UK has a native subscription model, but SaaS
accounts for less than 10% of revenues. We can also assimilate the business model of
security software vendors Avast in the Czech Republic (but listed in the UK) and F-Secure
in Finland as subscription-based. Finally, there are smaller SaaS or subscription-based
players – some are native SaaS vendors (IMImobile, Dotdigital and Proactis in the UK,
LiveChat in Poland, Sidetrade and Energisme in France, Lime Technologies and
24SevenOffice in Sweden, Admicom in Finland, Mercell in Norway), others are well
advanced to their migration to SaaS (Generix and Harvest in France, Exasol and
Serviceware in Germany, Ideagen in the UK, Efecte in Finland). However, all these
companies are “dwarfs” compared to North American peers. Finally, SAP, with EUR8bn+
revenues on cloud subscriptions and a hybrid business model, is the only European
software vendor which compares to the big US SaaS players, while Sage, Dassault
Systèmes, Avast, TeamViewer and Micro Focus are the pursuers.
Fig. 19 below shows there are four SaaS and subscription software vendors with a
market cap above EUR1bn: TeamViewer, Avast, Fortnox and Blue Prism. 14 others
have a market cap between EUR100m and EUR1bn, of which 13 in SaaS or subscriptions
(Vitec, Esker, LiveChat, Basware, Admicom, Dotdigital, Lime Technologies, IMImobile,
Exasol, Mercell, 24SevenOffice, Generix and Sidetrade) and one with an assimilated
subscription model (F-Secure).
Fig. 19: European SaaS and subscription vendors ranked by market cap
(EURm)
9 000
8 000
7 000
6 000
5 000
8 968
4 000
3 000 6 020
2 000
1 000 1 696 1 383

994 865 554 553 541 525 486 481 392 349 289
0
TeamViewer Avast Fortnox Blue Prism Vitec Esker F-Secure Basware LiveChat Admicom Lime TechDotdigital IMImobile Exasol Mercell
Source: Refinitiv, as of 13/10/2020.
22
The SaaS wave arrived later in Europe, primarily because of general reluctance
regarding public cloud (security, “sovereignty” and quality concerns, lack of local cloud
data centers, capex culture for software spending for CIOs). Such a situation gave
enough time for North American SaaS players such as Salesforce or ServiceNow to
establish themselves in their respective markets, with almost a “winner takes all”
situation. In the meantime, SAP, Oracle, Salesforce and Adobe consolidated their
leadership in many SaaS segments through the acquisition of US players. Finally, the
complexity of European markets and the absence of such a Tech ecosystem like the
Silicon Valley offered less opportunities for European native SaaS players, unless they
move their management and/or their head office in the US like Sitecore (a private Danish
company in experience management solutions, backed by EQT), Talend (a French
company listed on the NASDAQ) or Snowflake (founded in the US by two French engineers
who previously worked for Oracle). Consequently, rather than by disruption, the
SaaS/subscription model has developed in Europe by evolution, through a hybrid
model (on-premise and SaaS or subscriptions), then progressive migration towards SaaS
or subscriptions. Currently, the European software vendors generating more revenues in
cloud subscriptions – a sort of psychological threshold - than in licensing are Generix
(subscriptions = 8.8x licences), Sage (6.2x), Harvest (5.4x), SAP (2.2x), Exasol (2x), Axway
(1.5x), Ideagen (1.4x), Crealogix (1.2x), RIB (1.2x), and Serviceware (1.1x).
Fig. 20: Cloud subscriptions / Licences ratio for European hybrid software
vendors (x)
5
8.8
4
3 6.2
5.4
1 2.2 2.0
1.5 1.4 1.2 1.2 1.1
0
Generix Sage Group Harvest * SAP Exasol Axway Ideagen Crealogix RIB Software * Serviceware
Software Holding
* Harvest, which was acquired by Five Arrows, was delisted in July 2020 from Euronext Growth in Paris. RIB
Software was acquired by Schneider Electric in July 2020 and in process to be delisted from the Prime Standard
of the Frankfurt Stock Exchange.
Valuation multiples below those of North American

SaaS players
On Fig. 21 below, valuation multiples for SaaS and subscription software vendors are
still below those of their US peers. Some players are trading between 12x and 20x
EV/sales multiples (TeamViewer, Fortnox, LiveChat, Lime Technologies and Admicom)
thanks to their impressive non-IFRS operating margins, and others are trading
between 2x and 8x for 2021. We can explain this situation by revenues (in 2019: Mercell
EUR15m, Sidetrade EUR26m), lfl revenue growth below that of US SaaS players (in 2019:
Avast +9.1%, Basware +5.9%, Esker +18%, IMImobile +18%, Sidetrade +17%), the lack of
23
share liquidity, declining or eroding operating margin due to significant investment

related to business transformation, R&D or sales and marketing (Esker to 11.9% in 2019
from 15.6% in 2015, Sidetrade to 8.9% in 2019 from 22.2% in 2012, IMImobile to 9.3% in
FY20 from 13.7% in FY15), or ongoing operating losses while revenue growth is slowing
down (Basware not profitable since 2015 after having posted 14.3% operating margin in
2004, Blue Prism accentuating its losses over the last two years).
Fig. 21: European SaaS and subscription vendors: FY21e EV/sales multiple
(x)
20
18
16
14
12
10 19.6
8 16.8
13.9
6 12.5 12.6
4 8.0 7.7 8.1 7.9

5.8 6.4 6.7
2 3.6
2.5 2.0
0
TeamViewer Avast Fortnox Blue Prism Vitec Esker F-Secure Basware LiveChat Admicom Lime TechDotdigital IMImobile Exasol Mercell
Fig. 22: European SaaS and subscription vendors: 2019 and H1 2020 lfl
revenue growth (%)
80% 75%
70%
56%
60% 51%
50% 42%
37% 36%
40% 29% 30%
30% 24% 22%
18% 21% 19% 20%
14% 15% 16% 16%
20% 9% 7% 8% 6% 6% 8%
10% 0%
0%
-10%
-20% -8%
TeamViewer Avast Fortnox Blue Prism * Esker LiveChat F-Secure Basware Admicom DotDigital Lime Tech IMImobile * Exasol
2019 H1 2020
Fig. 23: European SaaS and subscription vendors: 2019 operating margins
(%)
60%
40%
63%
54% 53%
20% 42%
32%
23% 23%
14% 12% 8% 9%
0%
-7%
-17%
-20%
-61%
-40% -74%
-60%
-80%
TeamViewer Avast Fortnox Blue Prism Vitec Esker LiveChat F-Secure Basware Admicom Dotdigital Lime TechIMImobile Exasol Mercell
24
The majority of listed software firms has moved to

subscriptions
Traditional software vendors, which were only selling perpetual licences – and, for
some in industrial software like Dassault Systèmes, Aveva, Hexagon and ESI, used to rent
their licenses -, had to transform their business models in stages. First, they trialed the
SaaS or subscription model (Phase 1), then developed it side-by-side with their traditional
licensing model – the dual or bi-model approach (Phase 2). The next stage of the
transformation comes when the software vendor implements unified sales, marketing,
services and even R&D models for both their SaaS/subscription and licensing models
(Phase 3). The ultimate stage comes when the SaaS or the subscription model becomes
mandatory, or when the licensing model is treated as “legacy” (Phase 4) until it
disappears. An example of lengthy transition to the SaaS model is illustrated by Basware
(Fig. 24 below), which started in 2007 and is virtually completed.
Fig. 24: Basware – Revenue mix evolution (2008-2019) (EURm)
140
120
100
80
60
40
20
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Licences Maintenance Services SaaS Other
Fig. 25 below gives an almost comprehensive overview of the landscape in Europe for
SaaS and subscription in software. Size (“large” or “small”) refers to total revenues
generated either in SaaS or subscriptions: “large” is for revenues above EUR500m and
“small” is for revenues below EUR500m. Obviously, SAP is way above the rest with more
than EUR8bn revenues in cloud subscriptions, while the second largest, Sage,
generates an estimated EUR1bn+ of revenues on subscriptions – of which an estimated
EUR700m in SaaS -, and Dassault Systèmes generates c. EUR600m revenues in SaaS
thanks to the acquisition of Medidata. Finally, TeamViewer generates EUR500m+
revenues in SaaS mode, and Micro Focus is just below that number.
25
Fig. 25: The SaaS and software subscription landscape in Europe (revenues
in EURm)
 Phase 1: around 25 listed players, with no significant SaaS product. In this

category, we find players in Healthcare (CompuGroup, Pharmagest, Nexus,
Cegedim, Emis, RaySearch), Industry (Hexagon, ESI, IGE+XAO – owned by
Schneider Electric -, IVU), Financial Services (Alfa), Security and GRC (GB
Group, Beta Systems, Sword, Wallix), Telecoms (Enea), Utilities (PSI),
Development Tools (Qt), Semiconductors (IAR), and Retail (GK). Such a
situation is explained by the existence of strict regulations regarding cloud
(Healthcare and Financial Services), the long-standing existence of a software
rental business model (Industry, especially for simulation), historical
reluctance to cloud due to the existence of proven proprietary solutions
(Industry, Utilities, Retail, Telecoms)… In our view, this does not mean these
vendors will stay in that category forever, and changes in regulations or urge
for digitisation – the current crisis may be a catalyst – may change the rules.
 Phase 2: nine listed European players. Their common point is the

acquisitions of companies having a SaaS or a subscription model (Sopra Steria,
Nemetschek), and/or successful attempts to adopt SaaS or subscriptions for a
specific product (Nemetschek, RIB – owned by Schneider Electric -, Fabasoft,
Sopheon, ATOSS, Linedata). We have included Dassault Systèmes in this
category as well due to the acquisition of Medidata, which basically remains
an independent business as the deal is recent (September 2019) and its
integration with Dassault Systèmes and its 3DExperience platform is only
beginning. On its side, Temenos has the same sales force for its T24 Transact
core banking product whether it is implemented on-premise or in the cloud,
while it sells most of its front office offering (Temenos Infinity) on a SaaS
mode.
26
 Phase 3: 16 listed European players, with the global sales force embracing
SaaS or subscriptions – this means no dual sales model anymore. We estimate
SAP has the most advanced model in Europe, having unified its sales,
marketing, customer support and services into one model. This obviously leads
to the progressive conversion of the on-premise installed base to SaaS or
subscriptions, as long as the customer is ready for the jump. SAP is doing it for
CRM, HR, Business Intelligence, and has started to do it for Supply Chain
Management and ERP. In some ways, Dassault Systèmes is in that category as
well, as it is evolving its SolidWorks desktop licensing business model to the
cloud via 3DExperience-related SaaS product extensions. Since early 2020
Software AG has been switching perpetual licensing to subscriptions, while
SaaS products are still sold by a specialist sales force. Finally, Materialise is
selling two-third of its licences via subscriptions. Other players are Micro
Focus, Aveva (Schneider Electric), Axway, Claranova, Craneware, SimCorp,
Crealogix, Ideagen, Intershop, USU, Formpipe, EasyVista, and Cast.
 Phase 4: this is the most advanced level of migration to a SaaS or a

subscription model, with the extinction of licence revenues – licences are
sold only in specific cases such as for legacy products, legal reasons like in
public administration, or when access to a cloud is impossible. This category
includes Sage - which is replacing former licensing contracts by subscriptions
and makes a push on its Sage Business Cloud platform -, TeamViewer,
Basware, Esker, Vitec, Generix, Serviceware, Lime Technologies, Harvest,
Exasol, Efecte, and WANdisco.
Still lack of communication from European players

on KPIs
Fig. 26 below shows communication from European software vendors on SaaS and
subscription metrics is incomplete, unlike that of many US players. In addition,
metrics are heterogenous from one player to another, and have changed over time.
For instance, SAP now communicates only on its current backlog, Temenos on ACV/TCV
and ARR, Sage on ACV, ARR and renewal rate by value, Software AG on ARR and bookings,
and Materialise only on bookings. Neither Dassault Systèmes nor Nemetschek
communicate on a specific KPI, and none of these software vendors disclose its churn
rate or customer retention rate.
Fig. 26: KPIs for European software vendors with a SaaS or a subscription
model
SAP Dassault Systèmes Temenos Nemetschek Sage Group Software AG Materialise
Current backlog (C-RPO) Yes (2019) No No No No No No
TCV No No Yes (2016) No No No No
ACV No No Yes (2016) No Yes (2017) No No
ARR until 2014 No Yes (2016) No Yes (2017) Yes (2017) No
Renewal rate No No No No Yes (2009) No No
Renewal rate by value No No No No Yes (2018) No No
Bookings until 2019 No No No No Yes (2019) Yes (2014)
Total nb subscribers Yes (2013) No No No until 2017 No No
27
 SAP has been reporting only on current cloud backlog - less than one year,
excluding Ariba, Concur and Fieldglass which has an uncommitted pay-per-use
model - since early 2020. The company had reported on cloud ARR over 2012-
2014, deferred cloud revenues and end-of-year cloud backlog over 2012-2017,
and new cloud bookings over 2014-2019. The rationale for moving to current
cloud backlog from new cloud bookings is that current cloud backlog, which is
a subset of RPO, measures the contractually committed cloud revenue SAP
expects to recognise over the upcoming 12 months. Its expansion in a given
period reflects SAP’s success in both contracting new cloud business - new
cloud bookings, which includes purchases by new customers and incremental
purchases from existing customers - and renewing existing business.
 Dassault Systèmes has never reported an operating metric on SaaS or

subscriptions. Medidata, which was acquired by Dassault Systèmes in
September 2019, used to report its renewal rate by value and total
unadjusted/adjusted subscription backlog, but these KPIs are no longer
disclosed.
 Temenos has been reporting on SaaS TCV and ARR on a yearly basis since
late 2016, and on SaaS ACV on a yearly basis from late 2016 to mid-2018,
then on a quarterly basis from Q3 2018.
 Since 2017 and the launch of Sage Business Cloud, Sage has been reporting
the Cloud ARR - split between cloud native and cloud connected, i.e. cloud-
enabled versions of on-premise products -, as well as Sage Business Cloud
penetration, and the cloud renewal rate by value since 2018. With the
launch of its Sage One (now Sage Accounting) SaaS product in 2011, Sage has
started reporting on the number of paying Sage One customers (2011-2017), of
paying hybrid cloud customers (2012-2014), and of paying Sage Live (now Sage
Financial) customers (2016). With the launch of software subscriptions (core
application, connected application, services and features, support) in 2012,
Sage has started to report on the organic annual value of the software
subscriber base (2012-2018), the number of software subscription contracts
(2012-2015), the renewal rate for these subscription contracts (2012-2015),
and software subscription penetration (from 2014).
 Software AG has been reporting ARR for its DBP (Digital Business Platform)
business line since 2017, and product bookings in 2019. Due to the business
model transition to subscriptions, management now prefers product bookings
as the main KPI for measuring sales performance and for company guidance.
Bookings stand for the normalised 3-years’ commitment of a customer for
products, and do not make any difference whether the customer consumes
products as a perpetual license, a subscription or as a service.
 In the rest of Europe, for the stocks we do not cover, KPIs used by SaaS and
subscription vendors are tedious and heterogeneous. ARR is disclosed by
Basware, Exasol, Fortnox, Ideagen, Lime Tech and Mercell, MRR by Blue Prism
and Efecte, billings by Avast and TeamViewer, ACV by Axway, Generix and
SimCorp, bookings by Esker (only for the committed part of signed contracts),
Ideagen and Sidetrade, and retention rate by Blue Prism, Craneware and
TeamViewer.
28
Fig. 27: KPIs for other European SaaS or software subscription vendors
Avast Adjusted billings
Axway Software ACV new subscription contracts
Basware Cloud ARR order intake
Blue Prism Group Exit MRR / Closing customer base / Number of upsell deals / Net revenue retention rate / Gross retention rate
Craneware Total visible revenue for 3 years / Renewal rate by dollar value
Efecte SaaS MRR
Esker SaaS bookings (committed value of signed contracts)
Exasol ARR
Fortnox ARR / Number of customers / Average revenue per customer
Generix ACV new subscription contracts
Ideagen ARR / SaaS new business bookings
Lime Technologies ARR
Mercell Holding ARR
Sidetrade New bookings
TeamViewer Number of subscribers / Billings / Net retention rate
29
What about the M&A and IPO environment in SaaS in

Europe?
IPOs of European SaaS or subscription-based vendors have been scarce so far
Unlike the US, there is scarcity of SaaS IPOs in Europe, yet there has been an
acceleration trend during the last three years, with nine admissions to listing. We
have identified only 15 SaaS IPOs in Europe since 2005, excluding companies which have
been acquired in the meantime. The largest one was obviously TeamViewer in September
2019, floating EUR2.21bn – only by sale of shares from existing shareholders - and valuing
the company at EUR5.25bn – while Permira acquired the company in 2014 for EUR870m.
The last one, Energisme, was made in July 2020 and raised EUR8m. Besides this, some
companies have carried out their IPOs while they were advanced in their transformation
to a SaaS or a subscription model. This was the case, for instance, for Exasol and
Serviceware. Here again, share price performance since the IPO was stellar some of
them: 205x for Fortnox in 13 years, 27x for DotDigital in 11 years, 26x for Blue Prism in
four years, 11x for Admicom in just two years…
Fig. 28: SaaS/subscription IPOs by amount raised and performance as of

13/10/2020
Company IPO date Market Currency m IPO EV/sales Market cap (m) EV/sales (N) Mkt cap
raised valuation (N) (x) (x) change
(m) since IPO
Energisme 22-07-20 France EUR 8 28 6.1 36 8.4 29%
Mercell Holding 09-07-20 Norway NOK 450 1,955 5.6 3,121 8.9 60%
Exasol 25-05-20 Germany EUR 48 211 10.6 349 12.5 65%
TeamViewer 25-09-19 Germany EUR 0 5,250 14.7 8,968 20.6 71%
Lime 06-12-18 Sweden SEK 5 956 4.3 5,041 14.9 427%

Technologies
Serviceware 20-04-18 Germany EUR 60 252 4.3 142 1.5 -44%
Admicom 09-02-18 Finland EUR 5 47 3.0 525 23.0 1011%
24SevenOffice 21-12-17 Sweden SEK 0 1,220 14.8 2,130 12.1 75%

Scandinavia
Efecte 08-12-17 Finland EUR 6 30 1.9 49 3.0 60%
Blue Prism 15-03-16 UK GBP/p 10 49 3.8 1,252 8.0 2481%

Group
IMImobile 30-06-14 UK GBP/p 13 58 0.9 355 2.0 515%
LiveChat 10-04-14 Poland PLN 0 476 14.0 2,421 13.9 409%

Software
DotDigital 02-02-09 UK GBP/p 5 16 3.0 435 8.1 2618%
Group
Fortnox 14-05-07 Sweden SEK 13 86 22.4 17,590 24.7 20411%
Emailvision 14-02-06 France EUR 6 40 3.6 delisted - -
Sidetrade 07-07-05 France EUR 5 16 1.9 144 4.6 800%
Source: Refinitiv; Company Data; Bryan, Garnier & Co ests.
SaaS M&A deals in Europe are bigger on private companies

In Europe, the market for M&A in SaaS is focused on relatively small deals compared
to North America, at least for listed companies. We explain such a situation by the
average size of European SaaS firm, which is way smaller than in the US due to the size
of addressable markets which is constrained by the fragmented nature of Europe
compared to the US: languages, laws and regulations, cultures, political environments,
technological and financing ecosystems...
30
Consequently, promising European SaaS companies follow the same financing path as
their US peers - venture and private equity - but on lower amounts, have rarely opted
for an IPO so far, and usually prefer the backing of private equity funds.
Fig. 29: SaaS in Europe – M&A deals on private companies

Company Country Domain Acquirer Year Acquisition EV/sales
price
Silae France Payroll and HR Silver Lake Partners 2020 EUR600m 10.0x
Sogelink France Construction Keensight Capital 2019 EUR300m+ -
Kyriba France Treasury management Bridgepoint 2019 USD1,200m 10.9x
Episerver Sweden Digital experience Insight Venture Partners 2018 USD1,160m -
PeopleDoc France Human capital management Ultimate Software Group 2018 USD300m 10.0x
Sitecore Denmark Experience management EQT (majority stake) 2016 EUR1,000m 5.0x
DeepMind UK Artificial intelligence Google 2014 USD628m -
Neolane France Marketing automation Adobe 2013 USD600m -
Source: Company data; Crunchbase; Les Echos; Bryan, Garnier & Co ests.
Plenty of private SaaS players: the case of Europe and France

There are plenty of private SaaS companies in Europe, and it would be a huge challenge
to be exhaustive on the names even in the main countries. As such, we have opted to
introduce a selection of the most interesting players in Europe, France and Germany. In
a nutshell:
 the financing of European private SaaS universe has concentrated into a

couple of players.
 only a handful of European SaaS « unicorns » exist, and some of them have
moved their headquarters to the US in order to be closer to their international
customer base.
 many small players are backed by private equity funds.

In Europe, we have identified UiPath, Talkdesk, Celonis, Darktrace, Kyriba,
BenevolentAI, Algolia, OutSystems, and Collibra among the main private SaaS players.
Some have moved headquarters to the US: UiPath to New York from Romania in 2017,
Talkdesk to San Francisco from Portugal, and OutSystems to Boston from Portugal. During
their last financing rounds, valuation was USD10.3m or 28x ARR for UiPath in July 2020
before an IPO planned for 2021, USD3bn for Talkdesk, USD2.5bn for Celonis, USD1.65bn
for Darktrace, well over USD1bn for OutSystems, USD1bn for BenevolentAI, and USD1bn
for Algolia.
31
Fig. 30: Main European private SaaS players (USDm)

Company Country Domain Investors Amount Last round Last round
raised (USDm) valuation
(USDm) (USDm)
UiPath Romania/ RPA Accel, IVP, T. Rowe Price, Madrona, Tiger, 1,200 225 (2020) - 10,300
USA Tencent, Coatue, Sequoia… Series E
Talkdesk Portugal/U Contact centres Viking, Salesforce Ventures, Threshold, Storm 268 143 (2020) - 3,000
SA Series C
Celonis Germany Process Arena Holdings, 83North, Accel 368 290 (2019) - 2,500
intelligence Series C
Darktrace UK Cybersecurity Vitruvian Partners, Insight Partners, KKR, 231 50 (2018) - 1,650
Summit Partners… Series E
Kyriba France Treasury Bridgepoint 313 160 (2019) 1,200
management
OutSystems Portugal/U App Goldman Sachs, KKR, North Bridge, Armilar 422 360 (2018) - 1,000++
SA development private
Collibra Belgium Data intelligence Durable CP, Iconiq Capital, Index ventures, 346 113 (2013) - -
CapitalG, Battery Ventures… Series F
BenevolentAI UK AI / Medical Temasek, Woodford IM 292 90 (2019) - 1,000
venture
Algolia France App Accel 184 110 (2019) - 1,000
development Series C
Source: Crunchbase.
32
The transition in practice in our coverage
33
The transition in practice

in our coverage
Our investment cases on six transitioning software
companies
In light of this overview of the North American and European SaaS and subscription-based
software landscape, we found it useful to detail for six software vendors in our coverage
(SAP, Dassault Systèmes, Temenos, Sage Group, Nemetschek and Software AG) how the
transition to SaaS or subscriptions has been achieved, what was the impact of business
model transformation to revenue growth and operating margin, how we see their
positioning in that area in 2023 and what has to be done before getting there. Our
hierarchy of recommendations is as follows:
 We consider SAP (Buy – Top Picks – TP EUR166) the best-placed European

software vendor to benefit from the SaaS wave. Its transformation to becoming
a “cloud company” was really initiated in 2012, boosted from 2014 and has
basically been achieved. SAP is now the global No. 2 SaaS enterprise
application software vendor (behind Salesforce) with EUR8bn+ cloud
subscription revenues (or 30% of total revenues) with the intention to reach
EUR15bn in 2023, and is the No. 1 in several SaaS segments (human capital
management, procurement, travel and expenses, experience management…).
After several years of stagnation or decline, the non-IFRS operating margin
returned to growth in 2018 and SAP is well-engaged towards an average 1ppt
operating margin increase until 2023 thanks to better cloud gross margins now
that the cloud infrastructure has been optimised and made more efficient.
Moreover, we consider an IPO of Qualtrics will allow SAP to give more latitude
for this experience management business to accelerate growth, and to obtain
more cash to make ‘tuck-in’ acquisitions which will be consistent with SAP’s
vision of the “Intelligent Enterprise”. Finally, SAP’s EV/EBIT for 2021 remains
35% below that of European peers.
 We upgrade Temenos to Buy from Sell (TP CHF142 vs. 133) as we believe the
move to the cloud will be the main growth catalyst going forward. As such, we
raise our medium-term (2024-2030) lfl revenue growth assumption to +8% from
+6%. Temenos has started to make inroads in SaaS thanks to challenger banks.
Temenos’ move to SaaS really started in 2019 with the acquisitions of Avoka
and Kony in front-office solutions, and the launch of cloud-ready, cloud-
agnostic front and back office platforms, also available in a SaaS mode. The
launch of “neobanks” during the last few years has revealed the case for
cloud-based core banking systems, on a public, private or hybrid cloud.
However, pure SaaS core banking is likely to remain reserved to challenger
banks as they do not have to bear the risk of migrating from on-premise legacy
systems. We forecast 13% of Temenos’ revenues will be done through cloud
subscriptions in 2023 – which understates the fact large banks are likely to
move to cloud-hosted core banking and front office systems, for which licences
are recognised upfront. Progressive transformation to SaaS is likely to have
limited impact to non-IFRS operating margin, which should keep progressing.
 Nemetschek (Buy, TP EUR71) has only started its transition to a subscription-

based model, but we consider the transformation will be done carefully,
34
gradually and without damage to organic growth and margins. So far, the
transition has mainly stemmed from M&A, with bigger moves made in 2019-
2020 with the acquisitions of Axxerion and Red Giant, which now respectively
belong to Nemetschek’s Manage and Media & Entertainment divisions. This
transition could, in our view, contribute to support the group’s organic growth
rate in the 13-15% range in the next few years, while the Design division is
likely to grow at a high-single-digit growth rate, and we believe the Build
division will be negatively impacted by a transition to a subscription model. If
the company does announce a transition for Bluebeam (Design division) in
2021, there should be limited impact on growth and margins in 2021 and 2022.
However, we would still expect organic growth to be in the low double-digit,
and EBIT margins should be at or above 20%.
 Sage Group (Neutral, TP 730p) is well-advanced in its transition to

subscriptions, but operating margin is at its trough due to significant
investment in innovation, sales and the partner ecosystem. Sage’s transition
towards SaaS and subscriptions started ten years ago through a dual strategy
(cloud connected products and cloud native products) and has been
accelerated since 2018 with the launch of the Sage Business Cloud platform.
Such a move to this platform is made through new customer acquisitions,
client reactivations, and migration from legacy products. During the last five
years, its product portfolio has been simplified and the operating model made
more efficient. However, while we expect subscriptions will reach 63% of
revenues in FY20 and 76% in FY23, we believe there is a long way to go before
anticipating an operating margin close to 30% while new customer acquisition
is likely to be more costly than migrations in the years ahead.
 Dassault Systèmes (Sell, TP EUR147) has made significant progress in SaaS

thanks to the acquisition of Medidata, but now has to build a consistent SaaS
model outside of Medidata. Medidata has allowed Dassault Systèmes to
generate c. 15% of revenues in a SaaS mode, propelling the French PLM
software vendor as the global No. 1 in clinical trial management SaaS
solutions. Medidata’s integration into the 3DExperience platform will be done
gradually. On the other hand, Dassault Systèmes’ strategy of “cloudifying” its
SolidWorks software through SaaS add-ons raises some questions on when it
will accelerate the move to SaaS beyond Medidata and medical. We are
convinced synergies with Medidata will drive the operating margin upwards –
we expect +1ppt from cost synergies by 2023 -, but, at current scope, we
forecast Dassault Systèmes’ cloud subscription revenues will reach “only” 20%
of total sales in 2023, which makes the company less “defensive” than SAP on
that perspective.
 Software AG (Sell, TP EUR36 vs. 39) is currently the “model case” in Europe of
a business model transition to subscriptions, but such a transformation has
clearly had a negative impact to the operating margin. In particular, we doubt
a return to 30% margin is in the cards for very long, since Software AG has
made significant extra investment in 2020 and beyond dedicated to the
transition, adding sales capacity, a customer success team and marketing
staff. In addition, we still remain cautious on Software AG’s potential in IoT
(Cumulocity IoT), where growth remains solid but revenues small. Our target
price reduction to EUR37 from EUR39 is underpinned by a 1ppt reduction of our
medium-term (2024-2030) operating margin assumption (26% vs. 27%), while
we assume the recent ransomware cyberattack may add unexpected costs.
35
SAP: transition basically achieved, now a “cloud

company”
The journey towards a EUR15bn cloud company in 2023
SAP’s 2023 ambition is to generate more than EUR35bn total revenues (from
EUR24.74bn in 2018), more than triple cloud revenues from 2018 (to EUR15bn+ from
EUR5.03bn), reach a cloud gross margin of 75% in 2023, increase non-IFRS operating
margin by 1ppt per year on average and reach c. 34% in 2023, and get a share of
“more predictable revenues” (i.e. recurring revenues) approaching 80%. This assumes
over 2018-2023 total revenues up 7%+ lfl and cloud revenues up 24%+ lfl. Taking into
account 2019 (total revenues up 6.5% lfl and cloud revenues up 26.3% lfl), we estimate
SAP would have to post over 2019-2023 a CAGR of 6% for total revenue and 21% for
cloud revenue. In 2019, SAP increased non-IFRS operating margin by 0.8ppt to 29.7%, so
there is 1.0-1.1ppt of margin to gain every year to reach c. 34% in 2023. A virtual Capital
Markets Day will take place in Q4 2020 in order to provide an update on SAP’s strategy,
taking into account the implication of the current crisis to medium-term targets, which
may be amended.
We consider SAP’s transition to SaaS is basically achieved, and is now the “cloud
company” it intended to be in 2014, both in terms of numbers but also in terms of
culture. Except for certain successful on-premise products (the SAP HANA database
management system launched in 2011, the SAP S/4HANA ERP launched in 2015), the cloud
has become SAP’s selling model by default. For 2020, we estimate SAP’s cloud
subscriptions revenues, which we expect at EUR8.2bn (30% of total revenues), will
account for 2.2x licence revenues. For 2023, we expect they will reach EUR14.3bn (43%
of total revenues) or 5.5x licence revenues.
 On a product standpoint, SAP took years to find its way to really exist in
the cloud against pure players like Salesforce or Workday. Tested in 2007 with
the launch of the Business ByDesign suite for SMBs and several trials and
errors, SAP’s cloud strategy really came into life from 2012 with the
acquisition of leaders in their own business category (SuccessFactors, Ariba,
Fieldglass, Concur, Callidus, Qualtrics), the launch of the SAP Cloud Platform
(2012, platform as a service) then HANA Enterprise Cloud (2013, private cloud
infrastructure), then SAP S/4HANA Cloud (2016, ERP). The launch of SAP
C/4HANA (CRM) in 2018 was a revamp of SAP’s existing SaaS offerings in sales,
service, marketing, commerce and customer data, developed in-house or
acquired.
 Such a strategy could not be successful without a deep transformation of

the way the company operated: SAP had no choice but to become a “cloud
company” in order to impulse the move to the cloud and avoid generating a
“great divide” between the “old guard” – condemned to an inexorable decline
- and the young newcomers. The purpose of this transformation, which
started six years ago, was to migrate SAP to a single operating model for
R&D, sales, marketing, customer support, and cloud hosting, on a staged
manner. In 2014, SAP published the roadmap for the simplification of its
customer engagement approach, starting by the implementation of “one
service” and “one support” approaches, then “one go-to-market”. We
estimate most of this transformation has been done with the migration to a
converged cloud architecture in order to enable multi-cloud (hyperscalers,
HANA Enterprise Cloud or other clouds). The sales organisation still has to
benefit from more simplification: deduplication of structures across acquired
companies, more leverage from the partner ecosystem, and more digital
selling.
36
A clear global leader in five SaaS categories

SAP is the No. 2 global SaaS enterprise application vendor (behind Salesforce, and
ahead of Oracle, Microsoft, Adobe, ServiceNow, and Workday), and the global category
leader in several markets: human capital management (SuccessFactors), experience
management (Qualtrics), procurement (Ariba), travel and expense management
(Concur), and flexible workforce management (Fieldglass). On top of that, SAP has made
significant progress on the public cloud version of SAP S/4HANA (S/4HANA Cloud) with c.
2,000 customers, the SAP Cloud Platform with more than 9,000 customers, commerce
(SAP Hybris Commerce Cloud)... It is too early to assess SAP’s success in cloud business
intelligence (SAP Analytics Cloud), while the company still struggles to make its way in
mainstream CRM against Salesforce.
Obviously, SAP has some serious challengers in each of the categories in which it
competes, but so far, except in CRM where Salesforce has won the game (Adobe and
Oracle as well in marketing), these challengers have stayed challengers so far: Workday
in HCM and finance, Anaplan in financial planning, Medallia and SVMK in experience
management, Coupa in spend management…
Revenue mix change sustaining lfl revenue and operation margin growth
We consider the radical change in SAP’s revenue mix since 2012 will be the source of
sustainable lfl revenue growth going forward. With 25% of revenues generated in 2019
under cloud subscriptions and est. 30% in 2020 – vs. only 16% is software licences -, SAP
is very likely to be able to post very slightly positive lfl revenue growth in 2020 despite
licence sales that we estimate are down c. 15% lfl, thanks to cloud subscription revenues
resisting very well and up c. 20% lfl – despite the plummeting in transaction-based
revenues especially on Concur - and accounting for an estimated 30% of the mix. By
contrast, SAP posted a 10% lfl revenue decline in 2009 with virtually no cloud subscription
revenue and “only” 51% of recurring revenues (software maintenance). In 2023, we
estimate cloud subscriptions will account for 43% of revenues, while licence sales,
which we expect to be down double-digit in 2022-23, will fall to 8% of revenues.
Recurring revenues would then account for 79% of total revenues in that horizon, up
from 67% in 2019 and 51% in 2011.
Fig. 31: SAP – lfl cloud revenue growth vs. lfl total revenue growth (2001-
2023e)
40%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020e
2021e
2022e
2023e
Cloud subscriptions Total revenues
37
Fig. 32: SAP – Revenue mix (2012-2023e)
100%
16% 17% 17% 16% 15% 14% 14% 13%
90% 19% 17% 18% 17%
80% 10% 8%
13% 12%
21% 19% 16%
70% 23% 22%
29% 27% 25%
60% 36%
38%
40%
50% 42%
42%
40% 44%
48% 46%
49%
30% 52% 50%
51%
20%
33% 38% 43%
25% 30%
10% 16% 20%
11% 14%
2% 4% 6%
0%
2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Cloud subscriptions Maintenance Licences Services
SAP’s non-IFRS operating margin evolution is reliant on that of its cloud gross margin.
Between 2013 and 2017, non-IFRS operating margin fell to 28.8% from 32.3% while the
cloud gross margin fell to 62.2% from 71.2% as a result of the launch in 2014 of the IaaS
or private cloud offering (HANA Enterprise Cloud) – which was initially loss-making then
raised its gross margin thanks to rising volumes -, investment in a converged cloud
infrastructure – which was the chance to rationalise data centres, and make them open
to hybrid cloud environments -, and the migration of the installed base of cloud
acquisitions (SuccessFactors, Ariba) to the SAP HANA database from Oracle databases –
this migration, which was done progressively by small batches of customers, temporarily
required the maintenance of a redundant architecture until the migration was
completed. Strong progress was made in 2018-2019, as SuccessFactors completed the full
migration to HANA in Q2 2019 while Ariba did it between Q3 2019 and Q1 2020.
We estimate SAP has the means to reach 75% cloud gross margin in 2023 thanks to: 1)
the full benefit of the database migration to HANA for SuccessFactors and Ariba; 2) the
full benefit of the converged cloud infrastructure – the move to a single infrastructure
stack while there were 25 legacy infrastructure stacks until 2018 - with a significant
reduction in the number of cloud data centres; 3) partnerships with public cloud
hyperscalers (Project Embrace), starting from Microsoft Azure in Q3 2019, for hosting SAP
applications which have been so far hosted on SAP’s own data centres (public cloud or
HANA Enterprise Cloud). Project Embrace, which includes Microsoft Azure, Amazon Web
Services, Google Cloud Platform and Alibaba Cloud, is expected to bring economies of
scale SAP could not provide otherwise. Finally, while Qualtrics and Concur posted for H1
2020 a gross margin of 90.8% and 88.2%, respectively, there is still room for improvement
for other SaaS/PaaS products (SuccessFactors, C/4HANA, S/4HANA Cloud, SAP Cloud
Platform, SAP Analytics Cloud...: 67.2% in H1 2020, but can reach 75-80%), Ariba and
Fieldglass (70.6% in H1 2020, but can reach 80%), and HANA Enterprise Cloud (33.6% in
H1 2020, but can reach 40%).
38
Fig. 33: SAP – Cloud gross margin vs. non-IFRS operating margin (2013-
2023e)
76% 38%
74% 36%
72% 34%
70% 32%
68% 30%
66% 28%
64% 26%
62% 24%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Cloud gross margin (%) (left scale)

Non-IFRS operating margin (%) (right scale)
Qualtrics’ IPO project may add more value

In July 2020, SAP’s management announced its intention of applying for a listing of
Qualtrics in the US in the next few months. This decision was quite surprising as SAP
announced in November 2018 the agreement for the acquisition of Qualtrics for USD8bn,
while Qualtrics was just about to be listed on the NASDAQ. We believe that an IPO of
Qualtrics within the next few months will offer more opportunities to capture its
growth potential. Although its cloud subscription revenues grew 36% lfl in Q2 2020 or
twice SAP’s Q2 cloud subscriptions lfl trend (+18%), we view this decision as sensible: 1)
Qualtrics needs to show more independence from SAP in order to win deals outside SAP’s
installed base (e.g. other software firms like Salesforce with Tableau); 2) this is the best
way to incentivise and retain Qualtrics’s CEO Ryan Smith – a true entrepreneur - and not
repeat the mistakes of the past (e.g. Lars Dalgaard with SuccessFactors, Steve Singh with
Concur…); 3) Qualtrics will have free hands to be clearly identified as the No. 1 in
Experience Management against Medallia and SVMK and pursue its own acquisition
strategy. SAP will remain majority shareholder and may sell 10-15% of its stake in
Qualtrics.
Assuming an estimated EUR680m (USD785m) revenues for 2020, 10-15% of Quatrics’

shares sold to the public, and a 20-25x EV/sales multiple for 2020 (USD15.7-19.6bn), we
estimate SAP could get EUR1.4-1.9bn cash to accelerate its own growth. While we
currently expect SAP’s net debt on 31st December 2021 at EUR5.3bn (0.5x EBITDA and a
net gearing of 15%), these assumptions in terms of proceeds would lead to a net debt of
EUR3.4-3.9bn (0.3-0.4x EBITDA and a net gearing of 10-11%) at that horizon.
Dassault Systèmes: Medidata opens the door to SaaS

Dassault Systèmes’ SaaS strategy is for the moment entirely derived from
Medidata
Dassault Systèmes’ 2023 ambition is to almost double its non-IFRS EPS compared to
2018 (EUR6.00 vs. EUR3.11), assuming 9% CAGR on Software revenues (+8% on core
industries like transportation, aerospace and industrial machinery, and +12% on
diversification industries like high-tech, healthcare, energy and utilities, and consumer
39
goods and retail) and non-IFRS operating margin up 0.5ppt per year excluding
acquisitions. Out of the EUR3.00 EPS Dassault Systèmes intends to gain over 2018-2023,
EUR0.90 would stem from industry diversification, EUR1.20 from 3DExperience platform
adoption and upsell, and EUR0.80 from acquisitions (of which EUR0.70 from Medidata)
and the marketplace. Medidata is expected to generate 13-15% revenue CAGR over
2018-2023 (including 2ppt from revenue synergies on cross-selling with prudent phasing
from 2022) and reach USD1.2-1.3bn revenues in 2023 (or an estimated 15% of Dassault
Systèmes revenues), and an operating margin of 27% in 2023 (vs. 16% in 2018) including
5ppt derived from synergies (3ppt on R&D and 2ppt on G&A). For 2020, company guidance
for Medidata was revenues up 13% and an operating margin of c. 20%. A CMD will take
place in November 2020 in order to provide an update on Dassault Systèmes’ strategy,
taking into account the implications of the current crisis for FY23 targets.
Fig. 34: Dassault Systèmes – lfl cloud growth vs. lfl total revenue growth
(2013-2023e)
20%
15%
10%
5%
0%
-5%
-10%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020e
2021e
2022e
2023e
Cloud subscriptions Total revenues
We estimate Dassault Systèmes’ transition to SaaS is for the moment entirely derived
from Medidata, which was acquired in September 2019 for EUR4.8bn. Since the launch
of its 3DExperience platform in 2012, Dassault Systèmes before Medidata has adopted
an on-premise strategy opened to SaaS and cloud, based on the rationale of: 1)
customer reluctance to use public cloud infrastructure for working on industrial secrets;
2) the company’s desire to protect its network of distributors and resellers, which had
contributed to half of revenues. Consequently, instead of developing SaaS versions of
its software, Dassault Systèmes has opted for “cloudifying” its on-premise product
offering through 3DExperience. This has been the case for SolidWorks, for which it
opened this desktop software product to functionalities only available to the cloud
through 3DExperience (xDesign web browser-based design tool, Social Collaborative
Services, PLM Services, Product Designer, Marketplace) through an offering which was
rebranded 3DExperience Works in early 2019. In addition, regardless whether they are
bought as perpetual licences or rented -, Dassault Systèmes’ software can be hosted in
its own cloud.
Tested in 2007 with the 3DSwYm and 3DVia collaborative platform and tools, Dassault
Systèmes’ cloud strategy started in 2010 when it invested in a cloud infrastructure for
operating the “sovereign” cloud the French government wanted to put in place (the
aborted “Andromede” project). Dassault Systèmes removed itself from the project when
it took note that the business model was not viable, spun off its cloud infrastructure and
40
renamed it Outscale in 2012, used it as its private cloud partner for its 3DExperience
platform, then re-acquired it in 2017. As of today, 3DS Outscale operates a dozen of
data centres in Europe, North America and Asia. In parallel, Dassault Systèmes acquired
small SaaS-enabled players (Exalead, Netvibes, SquareClock…) to enrich its offering, and
in 2014 made its Enovia, SolidWorks, Catia and Simulia brands available for the cloud.
From 2014, it has opened SolidWorks to the 3DExperience platform with new SaaS design
functionalities. In addition, Dassault Systèmes inherited from SaaS software within the
acquisition of primarily on-premise software firms (Quintiq, Centric, IQMS). Dassault
Systèmes’ cloud business model is flexible and allows for either upfront licensing plus
recurring fees or pure subscriptions. Finally, Medidata, which is the No. 1 player in
cloud-based solutions dedicated to clinical trials, has provided Dassault Systèmes with
a credible starting point to become a real SaaS player.
The global leader in cloud-based solutions dedicated to clinical trials

Medidata’s cloud-based solutions dedicated to clinical trials encompass study
planning, start up, conduct and close out, and scientific insights. This has come in
complement to Dassault Systèmes’ Biovia brand which was created in 2014 following the
acquisition of Accelrys and the development of the BioIntelligence project ten years ago.
All in all, Dassault Systèmes generates c. 20% of revenues in Life Sciences (i.e. c.
EUR900m for 2020), of which 75% in the cloud. In clinical trials, Dassault Systèmes
competes against Veeva Systems (a SaaS player providing global business solutions for the
life sciences industry, including the management of clinical trials among others, and
listed on the NYSE since 2013; USD1,415-1,420m revenues guided for FY21 ending on 31st
January o/w c. 80% on subscriptions), Oracle (which acquired Phase Forward in 2010 for
USD685m while it reported USD213m revenues in 2009, then GoBalto in 2018 for an
undisclosed sum), IBM (on the Clinical Development part), ZS Associates (a private
consulting firm headquartered near Chicago), Model N (primarily focused on revenue
management and listed on the NYSE since 2013; USD160m revenues guided for FY20
ending on 30th September o/w USD115-116m on subscriptions), and Medrio (a private US
software vendor specialised in electronic data capture on clinical trials and having raised
USD32m in two venture financing rounds in 2011 and 2017).
On SolidWorks, Dassault Systèmes still generates the vast majority of its revenues
from licences, but SaaS is expected to advance in the future. At this stage, the
company still has to reassure on its ability to distance PTC in SaaS 3D design solutions
for the entry-level segment. In November 2019, PTC acquired Onshape – a pure SaaS
player founded by SolidWorks’ founder – for USD470m or est. 39x revenues expected for
2020. At this stage, although Onshape is considered as a real innovator in this area, its
revenues barely exceed the equivalent of EUR10m while we expect SolidWorks generates
EUR827m software revenues for 2020 with an installed based of 3m+ users and a reference
position for the training of students in engineering. Finally, Autodesk, which still remains
Dassault Systèmes’ main competitor on SolidWorks with Autodesk Inventor and Autodesk
Fusion 360 (645,000 monthly active users and 85,000 paid subscribers as of June 2020),
generated 18% of its revenues in Manufacturing (USD726m) for FY20 (ended on 31st
January) billed according to a subscription model, and we estimate it at c. USD760-770m
for FY21.
Synergies with Medidata will drive the operating margin upwards

Thanks to Medidata, we forecast SaaS will account for 15% of revenues in 2020, and
we estimate this share will reach 20% in 2023. Our forecasts assume SaaS revenues
derived from other products and services (SolidWorks xDesign and other SolidWorks add-
ons opening to the 3DExperience platform, SaaS versions of Exalead, Centric, Quintiq and
IQMS, Marketplaces on additive manufacturing and spare part sourcing) will still be
emerging and will not account for a significant percentage of total revenues. With
Medidata and subscriptions expected to grow above other revenues going forward, we
estimate recurring revenues will account for 73% of total revenues in 2023, up from
71% in 2020, 63% in 2019 and 67% in 2013, and we expect such a percentage increase
gradually in the long-term, as long as Medidata and other SaaS offerings maintain double-
digit growth. That said, if increasing the share of recurring revenues – which is already
high - generates more sustainable growth, we believe that Dassault Systèmes, at current
41
scope, is unlikely to be as resilient as SAP when it has to cope with an economic shock
as we estimate SAP’s revenue share in cloud subscriptions will account for twice that
of Dassault Systèmes in 2020 (30% vs. 15%). As such, we expect Dassault Systèmes’ sales
in 2020 will be down 2% lfl, vs. up 2% lfl for SAP. By contrast, we think Dassault Systèmes
is likely to grow at higher rates than SAP in 2021-22 as its new licence sales are likely to
grow, unless management decides to pivot to a subscription model.
Fig. 35: Dassault Systèmes – Revenue mix (2012-2023e)
100%
9% 9% 11% 12% 12% 11% 11% 12% 11% 10% 9% 9%
90%
80% 26% 24% 18% 18% 18% 18%
25% 25% 25% 27% 26% 25%
70%
60%
50%
56% 55% 54% 53%
40%
30% 65%
67% 63% 63% 63% 62% 62% 61%
20%
10%
15% 17% 18% 20%
0% 2%
2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Cloud subscriptions Recurring licences + maintenance

New licences Services
According to Dassault Systèmes, the acquisition of Medidata, which generated a 16%

pro forma margin in 2018 and is expected to reach c. 20% in 2020, will be dilutive to
Dassault Systèmes’ non-IFRS operating margin by 1.3ppt in 2020. As such, unless
Dassault Systèmes decides to discard the perpetual licensing business model to move to
subscriptions for virtually all products, we see non-IFRS operating margin increasing in
a sustainable way, driven by cost synergies with Medidata. We anticipate non-IFRS
operating margin of 32.8% in 2023, up from 29.4% in 2020. Based on a projection of
USD1.2-1.3bn revenues for Medidata in 2023 and assuming 5ppt of cost synergies over
2020-2023, we estimate these cost synergies would reach USD60-65m (EUR51-55m with a
EUR/USD rate of 1.18). Out of these cost synergies, 3ppt or USD36-39m (EUR30-33m)
would be done on R&D (cloud migration from AWS to 3DS Outscale infrastructure,
offshoring consistent with Dassault Systèmes practices) and 2ppt or USD24-26m (EUR20-
22m) on G&A (delisting and implementation of shared services). As such, we calculate
these cost synergies will have a positive 1ppt impact to Dassault Systèmes’ non-IFRS
operating margin in 2023.
42
Fig. 36: Dassault Systèmes – Non-IFRS operating margin (2013-2023e)
100%
13% 13% 15% 15% 15% 15% 15% 16% 17% 15% 15% 15%
90%
80% 18% 17%
17% 17% 17% 17% 17% 17% 19% 18% 18%
20%
70%
60%
31% 32% 32% 31% 30% 30% 30% 29% 28% 28% 28%
50% 27%
40%
8% 7% 7% 7% 7% 7% 7% 7% 7% 6%
30% 8% 7%
20%
31% 31% 28% 30% 31% 32% 32% 31% 29% 31% 32% 33%
10%
0%
2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Operating margin G&A S&M R&D Cost of sales
Temenos: SaaS makes inroads thanks to challenger

banks
Temenos’ long-term ambitions imply at least 20-25% CAGR in SaaS over 10-15
years
Temenos’ sustainable long-term annual ambition – i.e. on a 10-15-year perspective - is
to post 10-15% revenue CAGR (of which 15%+ CAGR on total software licensing, i.e.
software licensing and SaaS subscriptions), 15+% non-IFRS EPS CAGR, and 100%+ EBITDA
conversion into cash. In addition, it targets 36%+ non-IFRS EBIT margin for the medium-
term, vs. 32.4% in 2019. However, cost savings made in H1 2020 due to the crisis will lead
Temenos to c. 36% in 2020 despite falling licence sales, according to company guidance.
As such, we deem the medium-term EBIT margin target will be amended by February
2021.
Temenos’ transformation to SaaS is recent, as the company has really started it with
the acquisitions of Avoka (banking customer onboarding solution, 2018, 50% of revenues
from SaaS) and Kony (multi-experience solutions and development tools, 2019, less than
60% of revenues from SaaS), and the launch in 2019 of its Temenos Transact core
banking and Temenos Infinity front office platforms and of the Temenos SaaS offering.
It was pretty late in transformation as banks have been very conservative regarding the
use of public cloud so far. Nonetheless, the launch of “neobanks” (or challenger banks)
such as Varo in the US, Revolut in the UK, N26 in Germany, Orange Bank in France, Volt
Bank in Australia, Lunar in Denmark, FlowBank in Switzerland, Flowe in Italy or Next
Commercial Bank in Taiwan has revealed the case for cloud-based core banking systems,
on a public, private or hybrid cloud. In addition, traditional banks have embraced the
cloud for their new activities, and Temenos intends to add more functionalities available
on a SaaS mode. We deem cloud will become instrumental in the digital transformation
of banks, but the vast majority of them will use private or hybrid cloud when it comes to
adopting a new core banking system. This means, for their mainstream activities, banks
will buy Temenos licences and host them in dedicated data centres. Pure SaaS core
banking is very likely to stay reserved to small challenger banks, as they start from
nothing and do not need to undertake a heavy process of data migration. As such, we
deem SaaS subscriptions will account for 9% of sales in 2020 and 13% in 2023.
43
Fig. 37: Temenos – Revenue mix (2012-2023e)
100%
90% 21% 20% 20% 20% 18% 18% 19% 16% 16% 15%
27% 24%
80%
70% 33% 33%
30% 33%
30% 35% 39%
60% 28% 29% 38% 40% 41%
50%
40%
30% 42% 40% 40% 39%
45% 48% 43% 37%
20% 45% 39% 37% 37%
10%
6% 9% 11% 12% 13%
0% 0% 1% 2% 2% 2% 3% 4%
2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Cloud subscriptions Maintenance Licences Services
Temenos’ first attempt with the cloud was in 2011, when 12 Mexican financial
institutions deployed Temenos T24 core banking software to Microsoft Azure. In 2013,
Temenos opened itself to the SaaS model through the acquisition of TriNovus, which
offered banking compliance and core processing services to US credit unions and
community banks. The cloud strategy was accelerated in 2018-19 with Avoka, Kony,
and the launch of Temenos Infinity, Transact and SaaS. Temenos Transact is a cloud-
native and cloud-agnostic platform, which leaves the bank free to keep all or part of its
core banking system on-premise or deploy it on a public or private cloud. Temenos now
has more than 50 core banking clients in SaaS and Cloud, more than 1,000 clients use
Temenos SaaS Services, and more than 40% of all new deals are cloud. Recent SaaS client
references for Temenos include FlowBank (Switzerland) on Transact, Orange Bank Africa
(Ivory Coast) on Transact, Al Ain Finance (Abu Dhabi) on Infinity and Transact, Virgin
Money Australia on Infinity and Transact, Flowe (Italy) on Transact and financial crime
mitigation, Lunar (Denmark) on financial crime mitigation, and AlbaCo (UK) on Infinity
on Microsoft Azure.
Slow transformation to SaaS is likely to have limited impact to the operating

margin
Temenos’ ambitions, for the long-term (10-15 years), SaaS accounts for 35-40% of total
software licensing revenues (i.e. an estimated 20-25% of total revenues), up from 15%
in 2019 and 5% in 2014. With these assumptions, this implies, over 10-15 years, SaaS
revenue CAGR of at least 20-25% vs. licence sales CAGR of 10-15%. We consider with
the slow change to expect in the revenue mix, SaaS will obviously be a contributor to
revenue growth – it accounted for 49% of total software licensing growth in 2019 and
management expects more than 60% five years from now -, but is unlikely to really
accelerate total revenue growth as a slowdown in licence sales growth may happen. That
said, Temenos is expected to grow total revenues 10-15% per year on average – except in
2020. Given the rebound we expect in licence sales in 2021 - as frozen banking
transformation projects will emerge again - and the possible erosion in maintenance
revenue growth over time, we estimate recurring revenues will account for 51% of
total revenues in 2023, up from 50% in 2020, 46% in 2019 and 46% in 2014, and we
deem such a percentage will not evolve significantly in the long-term unless the
perpetual licensing model fades.
44
As SaaS is less profitable than perpetual licensing business, Temenos’ progress in the
cloud had been slightly dilutive to non-IFRS operating margin so far. However, such
dilution is reducing over time with increasing SaaS volumes and revenues and cost
synergies with Avoka and Kony, so we expect SaaS to become increasingly profitable.
When they were acquired, we estimate Avoka was at breakeven and Kony had mid-single
digit operating margin. Both Avoka and Kony were anticipated to be non-IFRS EPS neutral
in the first year, to be accretive after one year, and to reach group margins within two
years. Cost synergies with Kony were expected to be largely driven by G&A optimisation,
but also by the handover of more service workload (an estimated USD10m in annual
revenues at low margins) to systems integrators.
Fig. 38: Temenos – Non-IFRS operating margin (2013-2023e)
40%
38%
36%
34%
32%
30%
28%
26%
24%
22%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Nemetschek: transition only beginning

Gradual transition to subscriptions mostly through new businesses so far
Nemetschek is transitioning very carefully and gradually to a subscription-based
model. So far, the transition has mainly come from M&A as its first steps towards
subscriptions were made in late 2016 when the company acquired the Norwegian software
company dRofus (a data management tool for the construction industry) for c. EUR25m,
and a few months later the US structural engineering software company called RISA for
c. EUR21m, both being small acquisitions with a limited impact on the revenue mix.
Bigger moves were made in January 2019 with the acquisition of Axxerion (paid EUR75m,
included in the Manage division) and in January 2020 with the acquisition of Red Giant
(EUR70m in cash + a 15% stake in Maxon for a total estimated EV of EUR130m, Red Giant
is now included in Maxon, the sole brand of the Media & Entertainment division), both
having a larger share of subscription revenue than Nemetschek.
The last two acquisitions were part of bigger plans for the company to move both
related divisions to a subscription-based model.
 The manage division (7% of 2020e group revenue) was essentially built through
the acquisitions of MCS Solutions and Axxerion (merged into a new entity called
Spacewell), and is mainly subscription-based, although there is some project-
based pricing.
45
 In the media & entertainment division (c. 10% of 2020e group revenue), the sole
brand, Maxon, initiated a transition to a subscription model in Q3 2019 (see our
report: Unappreciated potential for growth in Media & Entertainment). So far,
and despite the impact of the impact of the lockdown, the transition has been
going very well in our view, considering that the division has managed to
continue to grow organically in each and every quarter.
An acceleration could come in the next few months

The transition of the two smallest segments could, in our view, contribute to support
the group’s organic growth rate in the 13-15% range in the next few years, as the
Design division will likely grow at a high-single-digit growth rate, while we believe the
Build division will be negatively impacted by a transition to a subscription model.
Our talks with Nemetschek lead us to believe that Bluebeam (part of the Build
division), the company’s biggest brand, could announce a move to a subscription-
based model in the course of 2021. Taking into account the main end-market of
Bluebeam (the US) and the current solution’s relatively cheap price (a licence costs less
than USD700) makes us think this endeavour could prove successful. A major brand such
as Bluebeam transitioning to a subscription-based model would significantly increase
Nemetschek’s share of subscription revenue, and therefore of recurring revenue.
Considering the uncertainties related to timing and pricing, we have not yet taken into
account this transition in our assumptions.
The last division not to have switched to a subscription model would be the Design
division, Nemetschek’s historical core business and still the biggest contributor to
revenue (BG estimate: 53% of 2020e revenue) and margin (BG estimate: 57% of 2020e
group EBITDA). In this division, it is not yet clear what model Nemetschek is going to
adopt in the future. We believe the company might, at least initially, choose to
commercialise both a license and a subscription, leaving the choice to the customer.
Overall impact of the group’s transition to subscription expected to be limited
Fig. 39: Nemetschek – Revenue mix (2013-2023e)
100% 4% 4% 4% 4% 5% 4% 5% 4% 4%
5% 6%
90%
28% 25%
80% 35% 32%
47% 48% 47% 41%
70% 53% 52% 49%
60%
50%
48% 50%
40% 47% 48%
30% 45%
43% 44%
48% 46% 43% 43%
20%
10% 16% 20% 21%
9% 14%
0% 3% 5%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Subscriptions Maintenance Licenses Consulting & Hardware
In all, the company is moving step-by-step to a subscription model. If the company

does announce a transition for Bluebeam in 2021, there should be a marginal impact
on the group’s growth and margins in 2021 and 2022. However, we would still expect
organic growth to be in the low double-digit, EBITDA margins to be above 26%, and EBIT
margins to be at or above 20% (notwithstanding the potential for further purchase price
allocation amortization in case of a new acquisition). Finally, with regards to a move to
46
a pure SaaS business model, the topic is not yet relevant in the space, as most industrial
software solutions across the world remains on-premise for now, except for some rare
applications.
Fig. 40: Nemetschek – EBIT margin (2013-2023e)
30%
25%
20%
15%
10%
5%
0%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Sage Group: transition to subscriptions almost

achieved
Sage Business Cloud and subscriptions are the main growth engine
In the medium term, Sage aims to post 10% lfl revenue growth and a 27%+ organic
operating margin. For the long-term, its objective is a 30%+ margin. Such growth
ambitions assume Sage raises its share of recurring revenues to 90%+ from 88% in H1
FY20, 86% in FY19 and 78% in FY18, by accelerating the transition to subscriptions (62%
of sales in H1 FY20, 52% in FY19 and 46% in FY18), shrinking perpetual licensing to almost
zero and customer support to a small amount. In parallel, Sage intends to be a “great
SaaS company” and to keep increasing the penetration rate of its Sage Business Cloud
within recurring revenues from 56% in H1 FY20, 48% in FY19 and 29% in FY18, through
cloud connected products – those which already were in the portfolio before 2012 like
Sage 50, 200 and X3, which have been “cloudified” - and cloud native products – basically
those released or acquired after 2012 like Sage Intacct, Accounting, People or Payroll.
Such a move to Sage Business Cloud is made though new customer acquisitions, client
reactivations, and migrations from some – but not all – legacy products. Finally, a
portion of legacy revenue representing a bit less than GBP200m (10% of group revenues)
is not intended to be migrated to Sage Business Cloud, and, in some cases, may be phased
down or disposed.
Sage’s 10 years’ old transition to SaaS and subscriptions is well-advanced, with the
switch to subscriptions and Sage Business Cloud being successful in all regions – yet
North America and the UK, with Sage Business Cloud penetration rates of 70% and 80% in
H1 FY20, are more advanced than Central & Southern Europe and International (Asia,
Middle East & Africa) regions, with penetration rates of 35% and 12%. Except for Sage X3
(ERP for mid-sized companies), subscriptions have become Sage’s selling model by
default. We expect software subscriptions will account for 63% of revenues in FY20 – vs.
55% in FY19 - (45% for Sage Business Cloud, of which 33% for cloud connected products
and 12% for cloud native products) and 70% in FY23 (52% for Sage Business Cloud, of which
38% for cloud connected products and 14% for cloud native products). This demonstrates
47
Sage’s catching up against a pure SaaS player like Xero (NZD718m revenues in 2019, of
which 184 in the UK) and Intuit, its historical competitor in the US.
Fig. 41: Sage Group – Revenue mix (2013-2023e)
100%
10% 8% 7% 6%
17% 13%
90% 20% 18% 18% 1%
29% 27% 4% 18%
80% 21%
4% 4% 24%
13% 26%
13%
70% 10%
10% 31%
60% 32%
41%
50% 38%
40%
40% 41%
48% 72% 76%
68%
30% 63%
52%
46%
20% 37%
32%
27%
10% 22%
13%
0%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Subscriptions Maintenance & Support Processing SSRS
 On products, Sage’s cloud strategy was a story of initiatives, acquisitions, and

rationalisation. The story started in the mid-2000s with country-specific
initiatives, acquisitions, and launches of SaaS versions of on-premise software
and connected services on top of on-premise software. In 2011, Sage
structured its cloud strategy through the release of the small business SaaS
product Sage Accounting, which was the starting point of a global product
approach pursued through Sage X3, the launch of Sage Financial, and
acquisitions (Fairsail, Compass, Intacct, AutoEntry, CakeHR). In 2017-2018,
Sage started to adopt a platform strategy through the introduction of Sage
Business Cloud in order to support all its products and add-ons from Sage and
partners (through a marketplace). Sage Business Cloud was the chance for
Sage to accelerate the transformation of its product portfolio to a clear and
consistent one - five mainstream products for small businesses and four for
mid-sized companies, focused on Accounting & Financials and People & Payroll
- from a patchwork of local products like it was 10 years ago at Sage. That
said, there is still a lot to do before the completion of this transformation,
since many mainstream cloud native products – e.g. Sage Intacct, Sage People
or CakeHR - are still only available in English-speaking countries.
 Like for SAP, this strategy could not be successful at Sage without a deep
transformation of the way the company operates. Transformation accelerated
over the last five years, with a single operating model for R&D, sales,
marketing, and customer support, including customer success management,
digital support (chat, web, knowledge base, community, bots), marketplace
apps, a new strategy for resellers… Country by country, Sage had to align local
teams to the global strategy without destroying the ingredients of local
success and ignoring local specificities (accounting rules, labour laws,
48
accounting practice regulations…). Under former CEO Stephen Kelly (2014-

2018), such a culture transformation went a bit too fast – with the
replacement of the vast majority of the middle management for instance –,
generated some internal dissatisfaction and led to the appointment of former
CFO Steve Hare as CEO in 2018. This issue has now been fixed, so the current
focus on the sales organisation on cloud products is about how to accelerate
new customer acquisition – e.g. through the availability of cloud native
products like Sage Intacct in more countries, and leveraging digital channels –
and slow down effort on migrations to cloud connected products in North
America and the UK as penetration rates are now high.
Operating margin to pick up again when transformation will be finished

With an estimated 89% of recurring revenues and an estimated 63% of revenues on
subscriptions growing at a rate above 20% in FY20, we consider Sage will resist pretty
well to the crisis, despite a high-double-digit fall expected for software and software-
related revenues (SSRS) due to both the freeze in new projects and some customers
moving to subscriptions and Sage Business Cloud. Obviously, new customer acquisition on
subscriptions has been clearly affected since mid-march 2020 and customer churn may
increase if the number of bankruptcies increases, but we deem subscriptions revenues
will be up 23% in FY20 (+25.6% lfl for H1, which implies +20.5% for H2) and 24% in FY21
(with lower growth in H1 and higher growth in H2) thanks to the reopening of the
economy, and up 28% in FY22 and FY23 with the launch of cloud native products in all
Sage’s geographies. As such, we estimate Sage will be able to post total revenues up 2.6%
lfl for FY20, and gradually accelerate to +3.4% in FY21, +6.5% for FY22 and +7.6% for FY23
– which is not yet at the +10%+ goal since there will still be some legacy products in the
portfolio and licence revenues falling.
Fig. 42: Sage Group – lfl subscriptions growth vs. lfl total revenue growth
(2013-2023e)
35%
30%
25%
20%
15%
10%
5%
0%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Subscriptions Total revenues
On a profitability standpoint, Sage has the means to reach its 27% medium-term
operating margin ambition, but it will take time to materialise, and we see it for
beyond FY23. While the fall in new customer acquisition and the increase in churn are
expected to be a burden on operating margin, Sage does not intend to sacrifice
investment in innovation, sales and the partner ecosystem. Management has estimated
such an investment will be reasonable, sensible and modulated according to the level of
49
revenues. In addition, further action will be made on costs, with more caution on staff
hiring, salary increases, variable compensation, and subcontractors – bearing in mind no
restructuring plan was on the cards and Sage has not applied for temporary furlough
schemes or government subsidies. As such, we expect the underlying operating margin
will fall to 23.1% in FY20 (vs. 23.1% in FY19 and 27.2% in FY18), then will pick up to 23.5%
in FY21, 24.8% for FY22 and 26.1% for FY23.
Fig. 43: Sage Group – Non-IFRS operating margin (2013-2023e)
28%
27%
26%
25%
24%
23%
22%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
Software AG: transition to subscriptions only in

progress
The Helix plan is the answer to ensure the switch to subscriptions
Software AG is currently the “model case” in Europe of a business model transition
to subscriptions from perpetual licensing. Such a transition was decided as part of the
Helix strategic plan introduced in early 2019 by CEO Sanjay Brahmawar. Software AG
had developed a SaaS model since 2013 with the launch of specific offerings gathered
into the “Software AG Cloud” brand (ARIS Cloud in process mining in 2013, WebMethods
Integration Cloud in 2014, WebMethods API Cloud in 2017 and WebMethods B2B Cloud in
2018) and a string of acquisitions – e.g. Cumulocity in 2017 on IoT integration, TrendMiner
in 2018 for self-service data analytics, and Built.io on enterprise integration PaaS).
However, although SaaS grew very fast (+97% in 2018 and +27% in 2019), it only
accounted for 3% of revenues in 2019, including a part which is volume-based (IoT)
with Cumulocity IoT. Given execution issues, which in our view stemmed from the rise
in power of SaaS or subscription models from new competitors (MuleSoft acquired by
Salesforce, Apigee acquired by Google), management needed to revamp the model in
depth to be back in the race.
The aim of the Helix plan is to accelerate revenue growth and provide higher quality
and visibility on revenue growth, margin and cash generation. The goal is for 2023 to
deliver EUR1bn revenues, 25-30% non-IFRS operating margin (revised in July 2020 from
28-30%, itself revised from 30%+, vs. 31.5% in 2018) and strong free cash flow, including
on the Digital Business Platform (DBP) business line, product revenue CAGR of 15%
(vs. 5% in 2018) and 85-90% recurring revenues (vs. 65% in 2018). In 2019, Software AG
posted EUR891m sales – 69% recurring on DBP - and non-IFRS operating margin of 29.2%.
50
 The Helix plan is being rolled out in three stages. The foundations have been
laid out in 2019 (simplification of the product portfolio, focus on hybrid
integration, API management and industrial IoT and some geographies with
improved sales coverage, transformation in the way to sell, development of
alliances and channels), 2020 is the pivot year as management is building
momentum by accelerating investment in five linked areas (sales, marketing,
subscriptions, culture and partnerships), and Software AG is expected to bear
fruit from Helix over 2021-2023 with growth acceleration and margin
improvement.
 The most important element of this transformation is the move to

subscriptions instead of selling perpetual licences. Such a move was prepared
in 2019 and has been effective since January 2020. The principle is that every
new sale is addressed in priority though a subscription, but there are two
exceptions: 1) historical products Adabas and Natural (A&N = 33% of product
revenues) are unlikely to switch to subscriptions as customers for these
products remain very conservative on their purchasing process; 2) some
customers will still require buying perpetual licences for regulatory reasons
(e.g. public administrations, large banks or insurance firms). On an accounting
standpoint, revenue recognition standards (according to IFRS 15) will
attenuate the switch to subscriptions. If the subscription contract includes an
annual termination right, the subscription will be recognised in revenues like a
perpetual licence for the length of the contract.
 For the transformation period, Software AG has stopped guiding on revenue

growth as it is no longer the best way to measure commercial success, due to
the mismatch between bookings and recognised revenues, and as sales
commissions are based on bookings. As such, from 2020 onwards, the company
communicates its targets in terms of bookings4 5 by business lines (DBP excl.
Cloud & IoT, DBP Cloud & IoT, A&N). On top of ARR, the other significant KPI
communicated every quarter is the percentage of DBP bookings billed on
subscriptions or SaaS.
The road to return to 25-30% non-IFRS operating margin is long

In the Helix plan, Software AG has assumed for 2020 that 50% its Product business
will stay with perpetual licences (40-50% for DBP excl. IoT & Cloud, 5-10% for IoT &
Cloud, and 90-100% for Adabas & Natural), 40% will move to subscriptions (50-60% for
DBP excl. IoT & Cloud, 40-50% for IoT & Cloud, and 0-10% for Adabas & Natural), and 10%
will be in SaaS (50-55% for IoT & Cloud). We estimate SaaS will account for 4% of total
revenues in 2020 and 10% in 2023. We forecast Software AG can generate 25% of
revenues in SaaS or subscriptions at that horizon, assuming 85-90% of Digital Business
Platform (DBP) revenues are recurring in 2023 – as specified in the Helix plan - (vs. an
est. 69% in 2020).
We consider the transformation will translate into lfl revenue growth which will
accelerate to 3% in 2021, 5% in 2022 and 7% in 2023 as revenues become more recurring.
We expect the share of recurring revenues to reach 75% in 2023, up from 52% in 2019,
4 To calculate bookings, Software AG proceeds as follows: 1) for perpetual licences, the
total licence value of the contract plus three years of maintenance; 2) for subscriptions
and SaaS, the ACV (annual contract value) multiplied by 3. Management has assumed c.
50% of subscription contracts will include annual termination rights.
5 The translation of bookings into revenues is assumed to be done: 1) for perpetual
licences and subscriptions (term licences) by a factor of 0.7 (EUR1 of bookings = EUR0.7
of revenues) in year 1 and 0.1 for the following years; 2) for subscriptions with annual
termination rights by a factor of 0.3 in year 1 and 0.3 for the following years; 3) for SaaS
by a factor of 0.2 in year 1 and 0.3 for the following years.
51
61% in 2020, 68% in 2021 and 72% in 2022. The main driver for such an increase will be
SaaS and volume-based revenues, which we expect to grow by 35% in 2020, 42% in 2021,
50% in 2022 and 45% in 2023 provided that Cumulocity IoT benefits from significantly
higher volumes on existing and new contracts like those with Schindler (one million lifts
and escalators for asset management), Siemens (on MindSphere) or Telstra (water
management for utilities in Australia). The other driver will be the switch to
subscriptions at the expense of perpetual licence sales. We expect perpetual licensing
will account for only 10% of revenues in 2023, down from 28% in 2019.
Fig. 44: Software AG – Revenue mix (2013-2023e)
100%
90% 21% 21% 19% 17% 16% 15%
25% 22% 23% 23%
32% 27%
80%
15% 12% 10%
70% 20%
29% 28% 29% 28%
60% 31%
31%
34%
50% 30% 49%
51%
40% 52%
51%
30%
47% 48% 48% 49%
43% 47%
20% 38% 39% 16%
14%
10% 11%
6%
2% 3% 4% 7% 10% 5%
0% 1% 1%
2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
SaaS & transaction-based Subscriptions Maintenance Licences Services
In parallel, we estimate there is a long way to return to pre-2019 non-IFRS operating

margin levels (30%+), and even 25-30% as management intends to do in 2023. Company
guidance for 2020 in 20-22%, down 7.2-9.2ppt due to EUR40-50m additional operating
expenses, of which 3.5ppt from the subscription transition – the rest being related to
investments – mostly people-related – in the customer success team, partnerships,
additional sales capacity, and marketing. This will continue in 2021 and beyond, but will
allow operating margin expansion if growth accelerates in order to reach c. EUR1bn
revenues in 2023. As such, we consider the margin will stabilise in 2021 at 22-23%,
then recover to 24% in 2022 and 26% in 2023.
52
Fig. 45: Software AG – Non-IFRS operating margin (2013-2023e)
32%
30%
28%
26%
24%
22%
20%
2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e
53
Top Picks
SAP | BUY - TP EUR166
Market Data: Fiscal year end 31/12 2018 2019 2020e 2021e 2022e
Financial Summary
EPS (EUR) 3.32 2.72 3.47 4.06 4.75
SAP Restated EPS (EUR)

% change
4.31
-6.4%
5.03
16.6%
4.84
-3.6%
5.43
12.2%
6.12
12.7%
EPS bef. GDW (EUR) 4.31 5.03 4.84 5.43 6.12
BUY Top Picks BVPS (EUR) 23.51 25.10 26.56 28.92 31.82
Operating cash flows (EUR) 4.13 3.45 4.07 4.34 5.13
FCF (EUR) 2.36 2.24 3.31 3.48 4.21
TP EUR166 Net dividend (EUR) 1.50 1.58 1.75 1.90 2.10
Bloomberg / Reuters SAP GR/SAPG.DE Average yearly Price
Avg. Number of shares, diluted (m) 1,229 1,229 1,229 1,229 1,229
Share price EUR134.22 Historical Entreprise value (EURm) 118,586 174,014 172,655 168,717 164,059
Valuation (x)
Market Cap. EUR165,0.13m
EV/Sales 4.8x 6.3x 6.32x 5.95x 5.38x
E.V. EUR175,599m EV/EBITDA 15.0x 18.7x 18.16x 16.43x 14.26x
EV/EBIT 16.6x 21.5x 21.11x 19.10x 16.48x
12m high / low EUR87.63/11.44 P/E 21.9x 26.5x 27.74x 24.72x 21.94x
FCF yield (%) 2.5% 1.7% 2.46% 2.59% 3.14%
Free Float 11.6%
Net dividend yield (%) 1.6% 1.2% 1.3% 1.4% 1.6%
Ytd Perf. +11.44% Profit & Loss Account (EURm)
Revenues 24,707 27,552 27,585 28,645 30,795
Change (%) 5.3% 11.5% 0.1% 3.8% 7.5%
lfl change (%) 9.9% 6.5% 1.9% 6.2% 7.5%
Adjusted EBITDA 7,930 9,295 9,595 10,368 11,613
143.25 Depreciation & amortisation -780 -1,183 -1,340 -1,450 -1,560
133.25 Adjusted EBIT 7,150 8,112 8,255 8,918 10,053
123.25 EBIT 5,704 4,495 6,140 6,866 8,001
113.25
Change (%) 17.0% -21.2% 36.6% 11.8% 16.5%
103.25
Financial results -103 123 -58 -43 -28
93.25
83.25 Pre-Tax profits 5,601 4,618 6,081 6,823 7,973
Exceptionals 0 0 0 0 0
Tax -1,513 -1,231 -1,764 -1,774 -2,073
Profits from associates 0 0 0 0 0
Minority interests 6 50 60 63 66
Net profit 4,082 3,337 4,258 4,986 5,834
Restated net profit 5,293 6,173 5,948 6,674 7,522
Change (%) -6.4% 16.6% -3.6% 12.2% 12.7%
Cash Flow Statement (EURm)
Operating cash flows 5,077 4,233 4,998 5,337 6,298
Change in working capital -775 -736 -199 -113 -120
Capex, net -1,401 -746 -737 -950 -1,000
Free Cash flow 2,901 2,751 4,063 4,274 5,178
Financial investments, net 475 -122 -1,179 0 0
Acquisitions, net -2,140 -6,154 -75 0 0
Dividends -1,678 -1,807 -1,866 -2,150 -2,334
Other 5,059 2,019 1,008 1,814 1,814
Net debt (+)/cash (-) 2,603 10,586 9,227 5,289 631
Balance Sheet (EURm)
Tangible fixed assets 3,553 5,497 4,894 4,394 3,834
Intangibles assets & goodwill 26,952 33,653 33,076 32,424 31,772
Investments 1,536 2,337 3,516 3,516 3,516
Deferred tax assets 998 1,286 1,286 1,286 1,286
Current assets 9,571 11,845 12,059 12,647 13,732
Cash & equivalents 9,075 5,611 6,470 9,908 14,066
Total assets 51,685 60,229 61,301 64,176 68,206
Shareholders' equity 28,876 30,840 32,625 35,524 39,090
Provisions
Deferred tax liabilities 85 80 80 80 80
L & ST Debt 11,678 16,197 15,697 15,197 14,697
Provisions 516 516 516 0 516
Current liabilities 10,665 12,368 12,383 12,859 13,824
Total Liabilities 51,685 60,229 61,300 64,176 68,206
Capital employed 31,479 41,426 41,852 40,812 39,721
Ratios
Operating margin 28.9% 29.4% 29.9% 31.1% 32.6%
Tax rate 27.0% 26.7% 29.0% 26.0% 26.0%
Net margin 16.5% 12.1% 15.4% 17.4% 18.9%
ROE (after tax) 14.1% 10.8% 13.1% 14.0% 14.9%
ROCE (after tax) 17.8% 16.7% 15.5% 17.5% 20.1%
Gregory Ramirez Gearing 9% 34% 28% 15% 2%
33 (0) 1 56 68 75 91 Pay out ratio 45.1% 58.2% 50.5% 46.8% 44.2%
54
DASSAULT SYSTEMES | SELL - TP EUR147

Data per Share (€)
EPS 2.20 2.37 1.89 2.42 2.97
DASSAULT Restated EPS
% change
3.27
8.3%
3.81
16.6%
4.03
5.7%
4.46
10.6%
5.00
12.1%
SYSTEMES EPS bef. GDW 3.27 3.81 4.03 4.46 5.00
BVPS 17.46 19.81 20.52 21.90 23.70
SELL Operating cash flows 3.60 4.02 4.72 5.17 5.73
FCF 3.12 4.09 3.77 4.51 5.26
TP EUR147 Net dividend 0.65 0.74 0.85 0.97 1.10
Average yearly Price 113.38 132.31 156.10 156.10 156.10
Bloomberg / Reuters DSY FP/DAST.PA Avg. Number of shares, diluted (m) 264.9 265.7 266.5 266.5 266.5
Historical Entreprise value (EURm) 28,224 37,804 43,678 42,848 41,857
Share price EUR160.2
Valuation (x)
Market Cap. EUR42,121m EV/Sales 8.1x 9.4x 9.86x 9.11x 8.17x
EV/EBITDA 25.7x 30.0x 29.04x 25.83x 22.59x
E.V. EUR44,777m EV/EBIT 36.7x 46.5x 33.74x 29.62x 25.56x
P/E 34.7x 34.7x 39.73x 35.92x 32.03x
12m high / low EUR164.0 / 108.3
FCF yield (%) 2.8% 3.1% 2.36% 2.82% 3.28%
Free Float 50.0% Net dividend yield (%) 0.6% 0.6% 0.5% 0.6% 0.7%
Profit & Loss Account (EURm)
Ytd Perf. +9.8% Revenues 3,477 4,018 4,483 4,759 5,188
Change (%) 7.7% 15.6% 11.6% 6.2% 9.0%
lfl change (%) 6.9% 7.0% -2.0% 8.2% 9.0%
Adjusted EBITDA 1,165 1,411 1,522 1,680 1,877
Depreciation & amortisation -66 -152 -212 -215 -218
162.84 Adjusted EBIT 1,099 1,259 1,310 1,465 1,659
152.84 EBIT 769 813 668 855 1,049
142.84
Change (%) 5.5% 5.7% -17.7% 27.8% 22.7%
132.84
122.84 Financial results 16 3 -24 -18 -13
112.84 Pre-Tax profits 785 816 645 837 1,036
102.84 Exceptionals 0 0 0 0 0
Tax -220 -210 -162 -218 -269
Minority interests -6 -9 -9 -7 -4
Net profit 570 615 491 626 770
Restated net profit 866 1,013 1,074 1,188 1,332
Change (%) 9.1% 17.0% 6.1% 10.6% 12.1%
Cash Flow Statement (€m)
Operating cash flows 954 1,069 1,258 1,377 1,527
Change in working capital -55 117 -133 -55 -6
Capex, net -72 -98 -120 -120 -120
Free Cash flow 826 1,088 1,006 1,202 1,402
Financial investments, net 1 -25 2 0 0
Acquisitions, net -353 -5,212 -20 0 0
Dividends -38 -169 -183 -220 -251
Other 51 3,420 -177 -153 -159
Net debt (+)/cash (-) -1,810 2,656 2,084 1,255 264
Tangible fixed assets 178 900 848 796 742
Investments 168 192 181 174 170
Deferred tax assets 164 195 195 195 195
Current assets 1,392 1,723 1,923 2,041 2,225
Cash & equivalents 2,810 1,946 2,517 3,346 4,338
Total assets 7,974 13,873 14,144 14,575 15,234
Provisions 265 265 265 265 265
L & ST Debt 1,000 4,601 4,601 4,601 4,601
Current liabilities 1,820 3,481 3,548 3,611 3,790
Ratios
Tax rate 28.1% 25.7% 25.2% 26.0% 26.0%
Net margin 16.4% 15.3% 11.0% 13.2% 14.8%
ROE (after tax) 12.3% 11.7% 9.0% 10.7% 12.2%
ROCE (after tax) 31.3% 13.3% 15.2% 17.6% 21.1%
Gearing -39% 50% 38% 22% 4%
Pay out ratio 29.5% 31.2% 44.9% 40.2% 37.0%
Gregory Ramirez EV Corrector 0.00 0.00 0.00 0.00 0.00
33 (0) 1 56 68 75 91 Number of shares, diluted
55
TEMENOS | BUY vs. SELL - TP CHF142 vs. 133

Market Data: Income Statement (US$m) 2018 2019 2020e 2021e 2022e
Financial Summary
EPS (USD) 2.37 2.55 2.41 3.34 3.91
TEMENOS Restated EPS (USD) 3.30 3.84 3.74 4.59 5.24
% change 17.5% 16.1% -2.4% 22.6% 14.2%
EPS bef. GDW (USD) 3.30 3.84 3.74 4.59 5.24
BUY vs. SELL BVPS (USD) 4.21 6.26 7.82 10.21 13.02
Operating cash flows (USD) 4.54 5.47 4.93 5.78 6.44
TP CHF142 vs. 133 FCF (USD) 3.93 3.78 3.97 4.96 5.59
Net dividend (USD) 0.75 0.85 0.95 1.10 1.25
Bloomberg / Reuters TEMN SW/TEMN.SW Average yearly Price (CHF) 136.48 121.50 121.50 121.50 121.50
Average yearly Price (USD) 139.35 157.10 115.77 114.21 114.21
Share price CHF122.0 Avg. Number of shares, diluted (m) 71.0 71.0 71.0 71.0 71.0
Market Cap. CHF9,053m Historical Entreprise value (USDm) 9,900 11,161 8,225 8,114 8,114
Valuation (x)
E.V. CHF7,443m EV/Sales 11.8x 11.5x 11.66x 10.21x 8.99x
EV/EBITDA 27.6x 26.3x 25.57x 21.35x 18.73x
12m high / low CHF176.9/98.44 EV/EBIT 32.7x 32.0x 31.99x 25.81x 22.21x
P/E 42.2x 40.9x 35.72x 29.14x 25.52x
Free Float 77.2%
FCF yield (%) 2.8% 2.4% 2.97% 3.71% 4.18%
Ytd Perf. -20.4% Net dividend yield (%) 0.5% 0.5% 0.7% 0.8% 0.9%
Profit & Loss Account (USDm)
Revenues 841 972 918 1,023 1,130
Change (%) 14.3% 15.6% -5.6% 11.4% 10.5%
lfl change (%) 12.0% 11.0% -13.8% 9.5% 10.4%
162.84
Adjusted EBITDA 359 425 419 489 542
152.84 Depreciation & amortisation -56 -75 -84 -85 -85
142.84 Adjusted EBIT 303 349 335 405 457
132.84
EBIT 219 235 232 309 355
122.84
112.84
Change (%) 22.7% 7.6% -1.5% 33.3% 14.7%
102.84 Financial results -23 -23 -32 -27 -20
Pre-Tax profits 195 213 200 282 335
Tax -27 -31 -29 -45 -57
Net profit 168 181 171 237 278
Restated net profit 235 273 266 326 372
Change (%) 17.8% 16.1% -2.4% 22.6% 14.2%
Cash Flow Statement (US$m)
Operating cash flows 323 388 350 411 457
Change in working capital 21 -41 18 33 35
Capex, net -65 -78 -86 -91 -95
Free Cash flow 280 269 282 352 397
Financial investments, net -17 -9 -1 0 0
Acquisitions, net -242 -594 27 0 0
Dividends -46 -52 -63 -74 -86
Other 354 295 -3 -17 -22
Net debt 527 1,022 780 519 229
Balance Sheet (US$m)
Investments 0 0 1 1 1
Current assets 316 423 381 410 437
Cash & equivalents 287 153 394 656 946
Total assets 1,648 2,322 2,431 2,662 2,924
Shareholders' equity 299 445 556 725 925
Provisions 10 11 34 34 34
L & ST Debt 814 1,175 1,175 1,175 1,175
Current liabilities 488 589 564 625 687
Capital employed 825 1,467 1,336 1,244 1,154
Financial Ratios
Tax rate 13.9% 14.8% 14.5% 16.0% 17.0%
Net margin 20.0% 18.6% 18.6% 23.2% 24.6%
ROE (after tax) 56.3% 40.7% 30.8% 32.7% 30.0%
ROCE (after tax) 33.2% 21.5% 22.7% 28.6% 34.5%
Gearing 176% 230% 140% 72% 25%
Gregory Ramirez Pay out ratio 31.7% 33.3% 39.5% 33.0% 32.0%
33 (0) 1 56 68 75 91
56
SAGE GROUP | NEUTRAL - TP 730p

Financial Summary
EPS (p) 26.32 27.57 32.18 26.94 30.67
SAGE GROUP Restated EPS (p)

% change
31.46
0.8%
34.36
9.2%
32.55
-5.3%
30.69
-5.7%
34.36
12.0%
EPS bef. GDW (p) 31.46 34.36 32.55 30.69 34.36
NEUTRAL BVPS (p) 116.59 132.14 146.56 156.44 169.98
FCF (p) 29.78 37.78 28.98 30.26 35.60
Net dividend (p) 16.50 16.91 16.91 16.91 16.91
TP 730p Average yearly Price 640.44 724.00 724.00 724.00 724.00
Bloomberg / Reuters SGE / SGE.L Avg. Number of shares, diluted (m) 1,138.2 1,138.2 1,138.2 1,138.2 1,138.2
Historical Entreprise value (GBPm)
Share price 712.2p Valuation (x)
EV/Sales 4.1x 3.9x 4.22x 4.02x 3.67x
Market Cap. GBP7,784m
EV/EBITDA Adj. 14.3x 13.3x 14.31x 14.34x 12.64x
E.V. GBP8,178m EV/EBIT 15.3x 14.1x 16.09x 16.18x 14.09x
P/E 20.4x 21.1x 21.88x 23.21x 20.73x
12m high / low 794.6/534.8p FCF yield (%) 4.7% 5.2% 4.07% 4.25% 5.00%
Free Float 100%
Profit & Loss Account (GBPm)
Ytd Perf. -4.6% Revenues 1,846 1,936 1,865 1,916 2,040
Change (%) 7.6% 4.9% -3.7% 2.8% 6.5%
lfl change (%) 6.8% 5.6% 2.6% 3.4% 6.5%
808.06 Adjusted EBIT 496 540 489 476 531
758.06 EBIT 427 448 494 425 480
708.06 Change (%) 22.7% 4.9% 10.2% -13.9% 12.8%
658.06
Financial results -29 -23 -21 -17 -15
608.06
558.06
Pre-Tax profits 398 425 473 408 464
508.06 Exceptionals 0 0 0 0 0
Tax -103 -116 -112 -106 -121
Net profit 295 309 361 302 344
Change (%) 1.2% 9.2% -5.3% -5.7% 12.0%
Cash Flow Statement (GBPm)
Change in working capital -10 108 -22 14 38
Capex, net -54 -42 -47 -47 -52
Free Cash flow 339 430 330 344 405
Financial investments, net 4 20 2 0 0
Acquisitions, net -8 29 222 0 0
Dividends -171 -181 -190 -190 -190
Other -58 -251 -45 7 10
Net debt (+)/cash (-) 649 394 82 -80 -305
Balance Sheet (GBPm)
Current assets 577 503 488 504 540
Cash & equivalents 272 371 683 845 1,070
Total assets 3,317 3,352 3,634 3,777 4,005
L & ST Debt 921 765 765 765 765
Current liabilities 985 1,008 1,111 1,141 1,216
Ratios
Tax rate 25.9% 27.3% 23.7% 26.0% 26.0%
Net margin 16.0% 16.0% 19.3% 15.8% 16.8%
ROE (after tax) 22.2% 20.5% 21.6% 17.0% 17.8%
ROCE (after tax) 19.6% 22.1% 21.2% 21.5% 24.9%
Gearing 49% 26% 5% -4% -16%
Pay out ratio 62.7% 61.3% 52.5% 62.8% 55.1%
Gregory Ramirez
33 (0) 1 56 68 75 91
57
NEMETSCHEK| BUY - TP EUR71

Financial Summary
EPS (EUR) 0.66 1.10 0.74 0.93 1.20
NEMETSCHEK Restated EPS (EUR) 0.66 0.84 0.74 0.93 1.20
% change 22.5% 27.2% -12.2% 26.3% 28.2%
FCF (EUR) 0.76 1.10 0.97 1.22 1.51
BUY Net dividend (EUR) 0.27 0.28 0.36 0.44 0.53
Average yearly Price 34.98 47.54 61.85 61.85 61.85
TP EUR71 Avg. Number of shares, diluted (m) 115.50 115.50 115.50 115.50 115.50
Historical Entreprise value (EURm) 4042 5465 7169 7070 6947
Bloomberg / Reuters NEKG.PA/NEKG.F
Valuation (x)
Share price EUR64.6 EV/Sales 8.8x 9.8x 12.66x 11.26x 9.76x
EV/EBITDA 33.3x 33.0x 44.43x 36.74x 29.93x
Market Cap. EUR7,461m EV/EBIT 41.3x 44.2x 63.44x 49.40x 38.25x
P/E 52.8x 56.5x 87.42x 69.20x 53.98x
E.V. EUR7,440m FCF yield (%) 2.2% 2.3% 1.50% 1.89% 2.34%
12m high / low EUR70.7/34.32 Net dividend yield (%) 2.3% 0.6% 0.6% 0.7% 0.8%
Profit & Loss Account (EURm)
Free Float 46.9% Revenues 461 557 588 652 740
Ytd Perf. +10.7% Change (%) 16.6% 20.7% 5.5% 10.9% 13.5%
Organic change (%) 14.1% 16.0% 1.5% 10.9% 13.5%
R&D 110 133 138 153 174
Adjusted EBIT 98 124 117 149 189
72.60 Change (%) 13.1% 26.4% -5.1% 26.7% 27.0%
67.60
62.60
Financial results 2 0 -2 -2 -2
57.60 Pre-Tax profits 99.3 123.2 114.9 146.4 187.0
52.60
Exceptionals 0.0 29.9 0.0 0.0 0.0
47.60
42.60 Tax -23.2 -26.4 -27.6 -36.6 -46.7
37.60
32.60
Profits from associates 0.5 0.5 0.0 0.0 0.0
Minority interests -0.1 -0.1 -2.0 -2.0 -2.0
Net profit 76.5 127.2 85.3 107.8 138.2
Restated net profit 76.5 97.2 85.3 107.8 138.2
Change (%) 22.5% 27.2% -12.2% 26.3% 28.2%
Cash Flow Statement (EURm)
Change in working capital 8 19 -1 7 10
Capex, net -11 -19 -11 -11 -12
Free Cash flow 88 127 112 141 174
Dividends -29 -31 -32 -42 -51
Capital increase 0 0 0 0 0
Other -30 0 0 0 0
Change in net debt 34 -31 2 -100 -123
Net debt (+)/cash (-) 10 -21 -19 -118 -242
Intangibles assets 102 128 186 163 140
current assets 82 86 95 105 116
Other assets 259 406 406 406 406
Total assets 581 857 922 1,006 1,116
L & ST Debt 131 188 190 190 190
Others liabilities 160 276 282 296 314
Shareholders' funds 250 349 354 422 511
Total Equity & Liabilities 581 857 922 1,006 1,116
Ratios
Adj. EBITDA margin 26.3% 29.7% 28.5% 30.7% 32.6%
Net debt/Adj. EBITDA (x) 0.08 -0.13 -0.11 -0.59 -1.00
Adj. EBIT margin 21.2% 22.2% 20.0% 22.8% 25.5%
Tax rate 23.3% 21.3% 24.0% 25.0% 25.0%
Adj. Net margin 16.6% 17.5% 14.5% 16.5% 18.7%
ROE 30.6% 27.9% 24.1% 25.6% 27.1%
ROCE 19.7% 18.1% 14.4% 16.3% 18.3%
Gearing 4% - - - -
FCF/EBIT 89.6% 102.8% 95.2% 95.1% 92.4%
Dividend payout 40.8% 25.4% 48.8% 47.5% 44.6%
David Vignon
33 (0) 1 56 68 75 92
dvignon@bryangarnier.com
58
SOFTWARE AG| SELL - TP EUR36 vs. 39

Data per Share (EUR)
EPS 2.23 2.09 1.43 1.52 1.80
SOFTWARE AG Restated EPS

% change
2.60
7.6%
2.55
-1.8%
1.75
-31.3%
1.82
4.0%
2.00
9.6%
EPS bef. GDW 2.60 2.55 1.75 1.82 2.00
SELL BVPS 16.37 17.94 18.65 19.44 20.60
Operating cash flows 2.68 2.67 2.09 2.16 2.33
FCF 2.45 2.14 1.90 1.98 2.16
TP EUR36 vs. 39 Net dividend 0.71 0.71 0.71 0.63 0.69
Bloomberg / Reuters SOWGn.f Average yearly Price 40.81 29.60 37.00 37.00 37.00
Avg. Number of shares, diluted (m) 75.7 75.7 75.7 75.7 75.7
Share price EUR37.5 Historical Entreprise value (EURm) 2,925 2,017 2,493 2,402 2,292
Valuation (x)
Market Cap. EUR2,775m
EV/Sales 3.4x 2.3x 2.94x 2.86x 2.59x
E.V. EUR2,552m EV/EBITDA adj. 10.5x 7.1x 12.01x 11.18x 9.80x
EV/EBIT adj. 11.0x 7.8x 13.74x 12.71x 11.03x
12m high / low EUR43.9/22.9 P/E 15.7x 11.6x 21.40x 20.57x 18.76x
FCF yield (%) 6.0% 7.2% 5.06% 5.28% 5.77%
Free Float 64%
Ytd Perf. +20.4% Profit & Loss Account (EURm)
Revenues 866 891 840 831 874
Change (%) -1.5% 2.9% -5.6% -1.1% 5.1%
lfl change (%) 1.5% 1.0% -1.1% 3.3% 5.1%
41.76
Adjusted EBIT 267 259 180 187 206
36.76 EBIT 232 215 148 157 187
31.76 Change (%) 4.0% -7.2% -31.0% 6.1% 18.8%
26.76 Financial results 4 7 6 6 7
21.76 Pre-Tax profits 236 222 154 164 194
Tax -71 -67 -48 -51 -60
Net profit 165 155 106 112 133
Change (%) 4.3% -1.8% -31.3% 4.0% 9.6%
Cash Flow Statement (€m)
Change in working capital -8 -30 -3 -2 -1
Capex, net -10 -10 -11 -12 -12
Free Cash flow 185 162 143 150 164
Acquisitions, net -47 -5 5 0 0
Dividends -48 -53 -53 -53 -46
Other 8 -53 -22 -22 -22
Net debt (+)/cash (-) -164 -223 -308 -398 -508
Balance Sheet (€m)
Current assets 328 362 366 370 390
Total assets 2,008 2,116 2,162 2,217 2,308
Provisions 76 91 98 105 105
L & ST Debt 313 297 282 267 252
Current liabilities 369 360 360 363 382
Ratios
Tax rate 30.0% 30.0% 31.0% 31.0% 31.0%
Net margin 19.0% 17.4% 12.6% 13.5% 15.3%
ROE (after tax) 13.3% 11.4% 7.5% 7.6% 8.6%
ROCE (after tax) 18.3% 17.1% 12.1% 12.9% 14.0%
Gearing -13% -16% -22% -27% -33%
Gregory Ramirez Pay out ratio 31.9% 33.9% 49.7% 41.4% 38.0%
33 (0) 1 56 68 75 91 EV Corrector 0.00 0.00 0.00 0.00 0.00
59
Bryan Garnier stock rating system

For the purposes of this Report, the Bryan Garnier stock rating system is defined as follows:
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therefore be reflected in the extent of upside in the
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Positive opinion for a stock where we expect a
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SELL short position Report has a short position in the securities or derivatives of the Issuer.
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DISTRIBUTION OF STOCK RATINGS

Conviction BUY 8.1%
BUY ratings 61.2%
NEUTRAL ratings 20.4%
SELL ratings 18.4%
Conviction SELL 0%
Summary of Investment Research Conflict Management Policy is available www.bryangarnier.com
60
SOFTWARE | SaaS: the virtuous circle of subscriptions
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BryanGarnier-SaaS Insight Report 2020

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SOFTWARE

SaaS: the virtuous circle of subscriptions

Managing complexity: creating

New business models: more

1. The SaaS model remains very attractive 6

2. In Europe, SaaS is more about a soft transition 22

3. The transition in practice in our coverage 34

The SaaS model remains very attractive

The SaaS model remains

120 000 246 724 242 815

80 000 152 915

Source: Refinitiv, as of 13/10/2020.

SaaS companies have demonstrated their ability to be profitable

Fig. 2: P&L structure of the 10 largest SaaS and subscriptions vendors in

Non-GAAP EBIT G&A S&M R&D COGS

Source: Company Data.

Fig. 3: P&L structure of the 10 largest on-premise and hybrid vendors in

Non-GAAP EBIT G&A S&M R&D COGS

Source: Company Data.

SaaS and subscriptions have led to sky-high valuation

Source: Refinitiv; Bryan, Garnier & Co ests., as of 13/10/2020.

Fig. 5: Top 15 SaaS and subscription-based software vendors: FY21e

Source: Refinitiv; Bryan, Garnier & Co ests., as of 13/10/2020.

Source: Refinitiv; Bryan, Garnier & Co ests., as of 13/10/2020

It is all about growth: SaaS versus on-premise/hybrid

Fig. 7: North American software vendors: FY21 EV/sales vs. FY19-FY22

Source: Refinitiv; Bryan; Garnier & Co ests., as of 13/10/2020.

88% 93% 85%

Source: Company Data; Bryan, Garnier & Co ests.

Source: Company Data; Bryan, Garnier & Co ests.

Very strong appetite for SaaS Ipos in the US

Snowflake 15-09-20 3400 33,300 44.0 69,066 114.6 107%

Dropbox 23-03-18 756 9,200 5.8 8,409 3.9 -9%

Zoom Video 18-04-19 751 9,200 13.4 152,915 63.5 1562%

Datadog 19-09-19 645 7,800 19.5 35,639 60.9 357%

Workday 12-10-12 637 4,490 13.6 55,197 12.6 1129%

CrowdStrike 12-06-19 612 6,600 11.8 33,615 39.6 409%

Pivotal Software 20-04-18 555 3,800 4.7 delisted - -

Cloudflare 12-09-19 525 4,400 13.1 11,512 26.7 162%

JFrog 15-09-20 352 4,000 24.3 6,528 41.5 63%

Medallia 18-07-19 326 2,500 5.4 4,601 9.3 84%

Pluralsight 17-05-18 310 2,000 7.8 2,731 6.1 37%

Anaplan 12-10-18 264 1,400 4.5 8,729 19.2 523%

Veeva Systems 16-10-13 261 2,400 10.1 46,537 31.7 1839%

MongoDB 19-10-17 256 1,170 5.7 17,782 32.1 1420%

Elastic 04-10-18 252 2,500 8.1 10,841 19.2 334%

Tenable Holdings 26-07-18 250 2,100 7.2 4,213 9.4 101%

Cloudera 28-04-17 225 1,900 4.2 3,674 3.8 93%

MuleSoft 18-03-17 221 2,900 9.1 delisted - -

PagerDuty 10-04-19 218 1,800 10.1 2,450 10.9 36%

Source: Company Data; Crunchbase; Refinitiv; Bryan, Garnier & Co ests.

The size of M&A transactions in SaaS has increased

Source: Company Data; Bryan, Garnier & Co ests.

Fig. 12: Top 15 SaaS M&A transactions – EV/sales multiples (x)

Source: Company Data; Bryan, Garnier & Co ests.

Subscription/SaaS metrics: revenues do not mean

Adobe Yes - - Yes - - -

Salesforce.com - - - Yes Yes - -

Zoom Video Communications - - Yes - - - Yes

ServiceNow - Yes Yes Yes Yes Yes -

Snowflake - - Yes Yes - - Yes

Autodesk - - Yes Yes Yes Yes -

Veeva Systems - - - - - Yes -